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Posts Tagged ‘PBR’

Monitoring of PbR needs greater independence

By Dr Clive Peedell, consultant oncologist, James Cook University Hospital - 18th May 2010 4:04 pm

Payment by Results (PbR) is a key government policy, and along with patient choice, foundation trusts, and pleurality of provision, is designed to create a supplier market into the English NHS.

According to the FT’s Nick Timmins (who’s also the visiting professor in public management at King’s College), PbR is the mechanism which “makes everything else possible” in NHS market reforms.

Considering the controversy and costs (14% of total NHS budget versus 6% prior to the purchaser provider split) involved in creating a market within the NHS, it is clearly in the public interest that NHS reforms like PbR are independently and properly scrutinised.

We should therefore be grateful that the Audit Commission has been charged with this duty. The commission website describes its values and principles in its corporate governance framework as follows:

Values: three essential values lie at the heart of all of the work of the Audit Commission: to be an independent voice in the public interest; to maximise the commission’s impact on the improvement of public services and to ensure that public funds are protected and well spent.

Principles: in its governance, the Audit Commission and commissioners will at all times observe the highest standards of propriety involving impartiality, integrity and objectivity in relation to the stewardship of public funds…

It has a particular remit from the health secretary to look at PbR. The commission’s remit on PbR policy is as follows: “The introduction of PbR represents a major change to financial management in the NHS. PbR offers both significant benefits and challenges. We have made it a focus of our audit work and national studies programme.

“In July 2004 we published a report which examined the introduction of PbR. We later followed this up with our second national report on PbR which reviewed the experiences of the system so far. We are currently scoping a third national study, which will examine how the NHS is responding to the financial management challenges of the impact of PbR and the configuration of services.”

Everything appears to be in hand, but who’s hands? It turns out that the managing director for health at the Audit Commission is a chap called Andy McKeon. He was formerly the director of policy at the Department of Health and played a central role in the development of a number of White Papers. In an article about NHS financial problems in Public Finance in 2006 he made the following statement: “In my previous job as a senior official in the Department of Health I was closely involved in developing PbR along with foundation trusts, patient choice, the introduction of more private sector providers and other elements of the package known in the NHS as ’system reform’. Indeed, some would say I was the main architect and therefore a chief suspect in my own right.”

I’m sure Andy works to the highest ethical standards, but I still find it quite remarkable that one of the chief architects of PbR is now in charge of auditing its outcomes, when the commission is supposed to be an “independent voice in the public interest”.

Since PbR is the mechanism that makes “everything else possible” in NHS reform, including involving greater private sector involvement, it is concerning that a FOI request by Private Eye suggests that Andy McKeon was entertained on 70 separate occasions over two and a half years, largely by consultants, private health companies and industry-funded think tanks.

Nothing surprises me anymore. I feel there’s a disturbing culture at the heart of politics, dominated by corporate lobbyists, self-interested politicians, external advisors and the management consultancy industry. And it’s not being helped by the disintegration of the civil service.

Tags: PBR
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Caution advised over incentive pilot scheme

By Mike Broad - 31st January 2010 9:33 pm

The English NHS should “proceed cautiously” in introducing payment for performance schemes aimed at improving quality, researchers have warned.

This scheme is scheme is called the commissioning for quality and innovation framework (CQUIN) and is being piloted in the NHS North West region.

It’s modelled on a US scheme and offers rewards to trusts - not clinical teams - for meeting clinical targets. Hospitals in the top two performing quartiles are offered 4% and 2% increases in tariff payments and there are no penalties for those with low scores.

CQIUIN follows the introduction of the quality and outcomes framework in primary care, which provided financial incentives to GPs. But, researchers from the University of York believe that the effects of incentive schemes on healthcare systems are still unclear and that the cost of implementing them may not be justified.

They point to possible problems such as its effects on motivation and increasing financial instability in a time of funding constraint in the NHS.

Although early data show good clinical engagement with the scheme in the North West, there is still uncertainty about the impact of rolling out the new scheme for NHS hospitals, they say on bmj.com. The authors argue that evidence of the effectiveness of the US incentive scheme is weak.

Clearly the costs and benefits of using rewards and penalties alone or in combination to induce clinical and organisational performance improvement needs to be evaluated, they write. This should include consideration of the possible problems of bias or gaming, as well as inadequate data collection.

Professor Alan Maynard, director at the department of health sciences, University of York, said: “The lesson learnt from the quality and outcomes framework is that we need to find out what the opportunity costs are of implementing the new scheme.

“If clinicians and hospitals allocate scarce resources to incentive schemes aimed at improving a particular set of conditions, there is a risk that other clinical conditions and procedures will get less attention and their outcomes will not be improved.”

Tags: Funding, PBR
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ISTCs are “cherry picking less complicated patients”

The Times - 11th November 2009 2:00 pm

Treatment centres run by the private sector are profiting from NHS funding by taking on less risky patients while being paid the same rate as publicly funded hospitals, a study suggests.

Patients treated in centres that carry out thousands of planned procedures, such as hip and knee replacements, to relieve pressure on the NHS are less likely to come from deprived areas, have fewer diagnoses and undergo fewer procedures than those treated in NHS hospitals, according to analysis of more than 3.3 million patient records funded by the Department of Health.

The national system for funding hospitals for treatment - known as Payment by Results - pays hospitals and treatment centres the same average cost for carrying out particular types of operation.

The average cost of a hip operation, for example, is about £6,000. But the actual cost to a hospital can be much higher, meaning that ISTCs could be profiting by taking on only less complicated, less expensive cases.

The study, by the University of York and others, published in the journal Health Policy, found “evidence that hospitals are treating patients of greater complexity than treatment centres”. The authors add: “If these observed differences between hospitals and treatment centres drive costs, then payments should be refined to ensure fair reimbursement.”

The authors say: “If treatment centres routinely treat patients with less complex needs within a healthcare resource group, they may profit at the expense of NHS hospitals. If so, this would suggest that the prospective payment system is unfair.”

Keith Brent, deputy chairman of the BMA’s consultants’ committee, said that, unlike NHS hospitals, ISTCs could “cherry pick” patients who were less likely to need expensive treatment. He echoed the call for any centre with a selection policy to be paid a lower tariff.

Call for medical records to be standardised

By Mike Broad - 2nd September 2009 3:49 pm

The Audit Commission is calling for the structure and content of medical records to be standardised nationally to improve care and the efficiency of clinical coding.

It follows the publication of the second annual Payment by Results (PbR) data assurance framework, which shows that 12.8% of the clinical codes for diagnoses and procedures were wrong. PbR is the fixed tariff payment system which directly links the income hospitals receive with the number and case mix of patients treated.

It suggests errors continue to affect the accuracy of payments for treatments in the NHS.

The Audit Commission report, published alongside this year’s framework, makes a series of recommendations to improve the recording of medical information. About 80% of the PbR audit reports recorded problems relating to the quality of medical records and some were judged unsafe to audit.

It calls for implementation of the Royal College of Physician’s national standards. This would unify the structure and content of medical records providing much needed clarity and consistency in the documentation of episodes and care and improve the efficiency of clinical coding.

The report says: “The factors that affect coding accuracy are the same as last year. The majority relate to the need for wider clinician involvement to improve the standard of records and other source documentation, validate codes and give direction on identifying and coding co-morbidities.

“There needs to be greater local emphasis on engaging with clinicians. National guidance and support on co-morbidities is also needed.”

It adds: “Poor quality records and documentation not only represent financial risks under PbR but, more importantly, may lead to significant clinical and patient safety risks. Improving the quality of records will help improve the quality of patient care.”

There were positives from this year’s framework, with the error rate having improved from 16.5% in 2007/08.

Meanwhile, research in the BMJ reveals more of the impact that PbR has had on healthcare delivery in the NHS.

Unit costs fell more quickly where payment by results was implemented, the research says. Evidence of an association between the introduction of payment by results and growth in acute hospital activity (volume of patients treated) was also found.

There was little evidence of any change in the quality of care associated with the introduction of payment by results.

“Taken together the analysis suggests that payment by results is capable of achieving, and has in the short time since its adoption actually achieved, real changes in delivery of health care in hospitals in England,” the authors conclude.

Tags: Medical records, PBR
Posted in Hospital Dr News | 1 Comment »

Clegg says hospitals should match lowest PBR tariff

The Guardian - 31st August 2009 3:24 pm

All hospitals would be forced to reduce the costs of operations to the lowest tariff in the country under controversial plans by the Liberal Democrats to cut waste in the public services.

As Britain prepares for the tightest spending round in a generation, the Lib Dem leader, Nick Clegg, this week will outline plans to rein in hospital trusts that are using their monopoly position to drive up costs. The plan will be seen as one of the most radical ideas of any of the main political parties to save money.

Under the Lib Dem plan, hospital trusts would be forced to charge the same rate for operations as the cheapest and most efficient hospitals in the country.

Clegg said: “It is a very specific but rather radical idea, of saying that all hospital tariffs under the ‘payment by results’ system should match the most efficient tariffs in the hospital system. We think that would save about £2bn a year.”

Clegg admitted this would be controversial because many hospitals would say they could not compete with those that reduced costs by performing many more procedures. He said the policy would be flexible and standards would not suffer. “There has to be suppleness in it,” Clegg said. “We are not going to be stupid about it.”

Tories planning to cut back NHS tariffs

HSJ - 4th August 2009 9:22 am

Patient choice may be restricted under plans mooted by Conservative leader David Cameron to squeeze the NHS budget if his party wins the next general election.

He has raised the possibility of reducing budgets for operations and treatments, which are based on the average cost around the country.

GPs and health trusts would be encouraged to negotiate prices downwards, he said, adding that “a businessman would probably tell you that it is when the business is facing difficulties that it is at its most inventive”.

Although Mr Cameron promised real increases in the health budget, he said the costs of treating Britain’s rapidly ageing population mean savings will have to be found.

“Overhaul” Payment by Results to save money

By Mike Broad - 3rd August 2009 10:25 am

Payment by Results has inflated NHS costs and needs radical overhaul, an influential body has claimed.

NHS Alliance is calling for PBR to be seen as a maximum price rather than an absolute price in order to deliver savings to the taxpayer during the downturn. PBR was introduced in 2003 and is a rules-based approach for paying for hospital services in the NHS. A national rate, or tariff, is set annually for each type of service and commissioners are then required to pay for the healthcare provided to their patients at this tariff.

Dr Michael Dixon, chairman of the NHS Alliance, said PBR had encouraged acute trusts to become “profit centres”.

He also questioned the accuracy of PBR data. Recent Audit Commission results have suggested that errors in estimating PBR costs may vary by up to 10%.

“We are talking about quite a large margin, which means that the level of error, up to 10%, may well be the equivalent of total savings required at a time of deficit,” he said.

Although the NHS Alliance welcomes the move from ‘average cost’ to ‘best value cost’ when pricing PBR, the organisation said this is not enough.

The NHS Alliance believes that if PBR represented a maximum cost many trusts would be able to offer services at considerably less than the tariff and thus benefit patients and the taxpayer.

Commissioners would, however, have to guard against being duped by market tactics such as loss leading or skimming. Dixon said: “These risks must be faced if the NHS is to keep within budget. If last year the focus was on quality, then the focus for the future must equally be on cost. Cost has now become the business of every clinician and manager seeking to provide the best value in health and care for patients.”

Tags: Commissioning, PBR
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Understanding NHS finance, budgets and commissioning

By Mike Broad - 23rd July 2009 3:24 pm

Political expectations are growing that hospital doctors will get to grips with NHS finances and get more involved in budget management and commissioning.

With the NHS facing a funding shortfall of up to £10bn for the three years after 2011, there’s increasing political pressure on doctors to help identify areas where savings can be made.

Lord Darzi also called for hospital doctors to be more involved in commissioning and budget management to help drive the quality agenda. In High Quality Care For All: Our Journey So Far, which charts the progress of the Darzi Review (July 2009), he calls for the extension of practice-based commissioning from GPs to hospital doctors and nurses.

To this end, the Academy of Medical Royal Colleges has teamed up with the Audit Commission to produce a guide on NHS finance for doctors. The guide says: “This is not about turning doctors into accountants; it is about enabling doctors properly to engage with finance colleagues so as to make the best use of NHS resources for patients.”

Commissioning - the background

Commissioning is the process of determining the health needs of the population, the resources available and how to organise service provision. Commissioning currently occurs mainly at PCT level and they’re responsible for buying services from local providers. This can be from NHS trusts, foundation trusts, themselves (or other PCTs) or from the independent sector.

The first step in this process is a Joint Strategic Needs Assessment. This is a process conducted in partnership by local government, PCTs and the local community to identify areas of priority for action to improve local health and wellbeing. It informs the Local Area Agreements, helping commissioners to specify outcomes that will help providers design local services and it’s been a statutory requirement since 1 April 2008.

Practice-based commissioning

Commissioning at PCT level can be seen as relatively remote from patients and clinicians. So, GPs have been given more say in how they deliver services to their patients because they’re closer to them. Theoretically, under practice-based commissioning, services better represent patients’ preferences.

PBC has also been developed with the aim of making the NHS more patient-centred by extending choice in elective care.

GPs can take on the commissioning and financial responsibility for large parts of PCT budgets and change the patterns of service provision. Practices can group together but the PCT retains legal responsibility. Practices can use 70% of the savings made for reinvestment for new services or more equipment.

While benefits have been seen in primary care, there’s little evidence so far that any form commissioning has greatly affected hospital services in the past 20 years.

Despite PBC being introduced in 2004, most GPs are really only now developing formal commissioning relationships with PCTs.

World Class Commissioning

World Class Commissioning is a government programme to improve commissioning and thus the quality of care. It strives to secure maximum improvement in locally prioritised health and wellbeing outcomes from existing resources.

There are 11 competencies for a PCT to become a World Class Commissioner. They include locally leading the NHS, working with community partners, collaborating with clinicians, engaging with public and patients, prioritising investment and promoting innovation. Commissioners will be assessed against them by an annual commissioning assurance process.

Understanding Payment by Results

If hospital doctors are to get more involved in finance, they need to understand Payment by Results. PBR was introduced in 2003 and is a rules-based approach for paying for hospital services in the NHS. It is a key part of the current reform programme in the NHS and was designed to directly link the payments that healthcare providers receive to the activity they undertake. PBR underpins patient choice by enabling the money to follow the patient.

A national rate, or tariff, is set annually for each type of service, with services classified by health resource groups. Commissioners are then required to pay for healthcare provided to their patients at this tariff.

PBR has significant implications for NHS organisations. Both hospital providers, and particularly PCT commissioners, face greater financial risk and reduced financial control.

With the price set nationally, contract negotiations focus on the volume of activity to be provided. Without the protection of fixed value block contracts, providers need to maintain a certain level of activity and ensure that costs do not exceed the national tariff in order to remain financially viable.

Budget management

Once an organisation has set its overall strategy and its service and financial plans, these need to be translated into a budget. Setting a budget in this way will ensure that resources are allocated in line with the organisation’s aims and objectives.

Good budget management is achieved where budget holders are held to account for managing their budgets; reports monitoring performance against budgets are accurate and provided regularly to budget holders; monitoring reports do not just contain financial data but are linked to information about performance and service improvements; and, variations against budget are identified and investigated, and corrective action is taken.

Financial management is about explaining and accounting for what has happened in the past and forecasting income and expenditure in the future. Using budget statements, budget holders should be able to identify the areas where they have spent less and spent more than their budget.

Service-line reporting provides a framework that enables NHS bodies to understand the combined view of resources, costs and income, and hence profit and loss, by service-line or specialty rather than at trust level. Managing at this level allows managers and clinicians to make more effective decisions about, for example, growing or reducing services on the basis of efficiency and profitability, where cross-subsidisation is occurring, or where services might be better provided in the community. PBR has encouraged more trusts to adopt a more comprehensive approach.

There is also a growing impetus for trusts to introduce patient-level information and costing systems. It involves a bottom-up approach to costing, using information about individual patients’ resource consumption. The costs of individual patients are aggregated to generate costs for differing groupings, for example by HRG, by procedure or by consultant.

This provides a much better understanding of what drives costs and how to make efficiencies.

Making changes and efficiencies in NHS services

Efficiency savings can either be cash releasing or non-cash releasing. Cash-releasing efficiency savings result in the cost of the service provided being reduced. Non-cash releasing efficiency savings occur when more activity is provided but the cost of delivering the service remains the same. An example of this could be a reduction in average lengths of stay, which resulted in more patients being treated.

Improvements in quality and efficiencies are expected to be secured through better procurement, commissioning, organisation and management, with any additional savings being reinvested in new or better local services.

There are a variety of reasons why changes to service delivery might be made; for example, to improve the patient experience, the need to meet efficiency targets or to move services from secondary to primary care.

The financial consequences of such changes should have been determined and set out in a business case.

Developing a business case

A business case is a document developed to support decision making for new investments or to change or develop a new service. It sets out the case for undertaking a project, weighing up the objectives and benefits against the estimated costs and risks. Business cases should include: measurable objectives; an appraisal of all the options available (including the ‘do nothing’ approach, an indication of the preferred option and an explanation setting out why it is favoured); demonstrate the affordability and value for money; provide a timetable reflecting the life of the project; and define the roles and responsibilities of those involved.

It should make a compelling case to the audience that is going to judge its merits and should be subject to a robust appraisal process which evaluates its relative costs and benefits, both financial and non-financial.

Financial training for doctors

The report, A Guide to Finance for Hospital Doctors, by AMRC and the Audit Commission also suggests that clinicians should receive financial training to help them understand budgets, commissioning and their monitoring.

Related stories

PBR needs overhaul

Tags: Commissioning, Darzi review, Funding, PBR, Practice-based commissioning
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