Is it the End for Payment by [non]Results? I hope so…

This image has an empty alt attribute; its file name is confused.jpgMost people find the way the NHS is run confusing, to say the least. In fact, most people who work in the NHS find it just as confusing – particularly front line staff. People in local government often complain (quite rightly) that there are so many parts of the NHS it’s difficult to tell who is in charge and how decisions are made. It is only a rare few of us that understand how it is run and how to bring about change in a whole system. Surely this can’t be right, I hear you say? You are correct. The problem is that successive political reforms has made it so complicated. Most politicians I meet (from all parties) don’t know how it works, or why successive layer on layer of “reforms” (also from all parties) have left it so complicated.

The way finances and contracts run in the NHS internal market is probably one of the most confusing and odd ways to run a market in the world. I’ve seen people from the private sector join NHS management and within a few months they leave saying its “impossible to work in this environment”. It is difficult, but change can be brought about. Often more slowly than anyone would like.

There are lots of things to know about the way the NHS is run, but one of the key things is the tariff system. One great thing about the new NHS Long Term Plan is that *finally* it has been recognised that the tariff system (known for some inexplicable reason as “payment by results”) often works against any attempts to make the NHS more cost-effective, more patient-centred, or high quality. The tariff system basically works like this:

  • GP refers patient to hospital to see a consultant. Hospital charges a standard charge (modified by a few % according to cost of living in the area or “market forces”) for the outpatient appointment in that specialty. This is irrespective of whether they see the consultant, or junior doctor, or nurse as long as it is consultant supervised. Any investigations are also charged at a standard charge. Follow up appointments are charged against a standard charge. Any operations are charged against a standard tariff too. Also any emergency admissions have standard tariffs according to HRGs, which are a mix of the diagnosis, the procedures, the [recorded] complexity of the patient, and also length of stay etc.
  • Hospitals make money by “activity” ie outpatient appointments, operations. or emergency admissions etc. They have lots of fixed costs – staff, buildings etc. Most hospitals struggle to balance the books, so they have historically been encouraged to increase activity by NHS Improvement (NHSI) to minimise or avoid a deficit in their finances. All good you may think.

However – a hospital (provider) being incentivised to do as much activity as possible on  standard charges isn’t necessarily best for patients or the health system. Let me give you a couple of examples (from a “planned care” perspective), where what the tariff incentivises is not what is best for patients or best use of staff:

Example 1

  • GP refers patient with blood in urine for urology investigations. The patient is going to need an MRI and a cystoscopy (which can be done in a modified outpatient setting or an operating theatre). The standard way of doing this is: outpatient appointment, then MRI, then another appointment, then a cystoscopy in the daycase theatre (the hospital can charge more for the same procedure if they do it in an operating theatre than a modified outpatient appointment), then another appointment. This will cost the NHS £ thousands, use up huge amount of doctor’s time, uses up expensive and in-demand theatre time and space, and the patient will have to attend the hospital SIX TIMES. For the elderly this can be onerous, for those who work it can be very intrusive, and for all it is inconvenient – and the car parking charges are sky high!
  • I worked with our local urology team to streamline this in our local patch. Some of the above patients may end up having cancer, so we really wanted to speed it up, and also stop wasting the time of the doctors and the patients with avoidable appointments. We devised a scheme based on “one stop shop” clinic, where all of the above would be done on one day rather than six. To do this we needed the GPs to provide more information to the urologists and the patients, so we needed to inform and educate them about the new process and develop and provide patient leaflets, we needed the patients to be prepared for having a scan and a minor procedures and to spend most of the day at the hospital when they visited. The hospital had to modify their outpatient facilities to do the cystoscopies – which cost them money. 
  • The changes were fantastic for patients, have improved the speed of care and minimised any waste of resources. The problem is that the hospital gets less money (less PBR tariff). Usually this would mean that it would be very very hard to negotiate the change. Luckily, the hospital wanted to improve it’s cancer care in particular and there was very strong clinical leadership. We involved finance teams and came up with a local solution. Thank goodness – but this is often really hard, as the tariff is not designed for streamlined care like this, and does not incentivise it. Our one stop clinic, even though it’s best practice, is not the norm.

Example 2

  • GP spots a heart murmur incidentally when examining a patient. The standard way of dealing with this is referral to hospital, outpatient appointment, echocardiogram on another day, then another outpatient appointment. Each one of those visits to hospital earns money for the hospital, but the patient is inconvenienced three times and the consultant/ their staff sees the patient twice. Most murmurs are found to be “innocent”, and nothing needs to be done. The patient is eventually discharged.
  • Instead we negotiated with the cardiologists – working under a huge pressured system – that the GP could order the echocardiogram directly, and they would get a report which would say if the murmur is innocent of if the cardiologist needs to see the patient. Simples… But again, the hospital gets less money. And there is no national tariff for an echo. Luckily, again because of strong clinical leadership and cooperation from the hospital, the service was redesigned, saving alot of patient and cardiologist time- and money that could be used on other things. 

The problem above I’ve described above is the way the tariff system is a perverse incentive against streamlining care. CCGs have to negotiate changes, and this can be difficult, because it can have an adverse affect on one part of the NHS, even if it benefits another part, and the overall local health system! Streamlining care as described above is safer, faster, more convenient for patients, and a better use of both NHS staff time and NHS finances. 

Other problems with the tariff is that it incentivises hospital admissions as well, when often an alternative might be better. In particular the elderly can become weaker in hospital, and out of hospital alternatives are often much better.

The NHS is complicated, and getting rid of the tariff is not a panacea, but I for one would like local health systems to be able to have more flexiblity over how things are paid for, so perverse incentives are removed. Thank goodness the Long Term Plan is actually trying to tackle this area, and thank goodness clinical leaders and working to make the best of the difficult way the NHS is set up.