Feature / PBR – up for discussion

A majority of provider finance managers believe payment by results should be extended beyond the current range of services covered by national tariffs, according to an informal poll conducted at the HFMA Foundation Trust annual conference in Blackpool.

Nearly 80% of finance managers, taking part in a debate at the conference at the beginning of July, believed the scope of the payment system should be extended. More than 120 managers took part in the informal session, with delegates drawn from existing and aspirant foundation trusts. Some 33% were happy with the current pace of extension while 46% thought the spread should be more rapid.  Just one in five backed no further extension currently.

Andy Hardy, finance director of University Hospitals of Coventry and Warwickshire NHS Trust and chairman of the HFMA’s PBR special interest group was one of a panel of speakers taking part in the debate. He said it was time to bite the bullet and expand the tariff, believing the expansion should take in more acute activities, including specialist services, and both mental health and community activity. However co-panel member Jane Tomkinson, finance director of the Countess of Chester NHS FT, told the conference that the priority should be getting the current tariff right before ‘jumping to the next stage’.

One mental health FT delegate said that mental health trusts faced huge risks from not being under the tariff, with fears that block-style contracts were more vulnerable to cuts than acute sector activity based contracts.  Current plans in mental health are for a national currency ‘to be available for use’ from April next year, with a national tariff in place no earlier than 2013/14. Despite concerns that this was too slow, mental health managers accepted they faced major challenges in getting the tariff up and running.

The debate posed the question: ‘Is PBR alive, dead or just wounded by the credit crunch'. At the start of the debate, more than a third of delegates were happy that PBR was in good health, while nearly two thirds diagnosed the payment system as ‘wounded’ and in need of some attention. 

Chris Calkin, finance director of University Hospital of North Staffordshire NHS Trust, chaired the debate. He said the debate reflected a growing consensus that the PBR system needed to evolve to deliver current priorities and to reflect the tightening of resources. He highlighted recent calls for change from the NHS Confederation and Professor Chris Ham, from the University of Birmingham, and pointed out that the Department of Health had itself acknowledged that some of the existing levers of reform might need to adapt as a result of the wider economic recession.

The tariff has been accused of incentivising increased activity rather than driving quality. And a majority of delegates acknowledged the poor links with quality. Nearly six out of ten managers believed the tariff itself had no impact on quality although some managers insisted it had already produced quality improvements and others said the tariff was starting to have a positive impact – a recognition of the introduction of the CQUIN quality incentive scheme that is operating alongside PBR for the first time this year.

Ms Tomkinson disputed the view that PBR incentivised activity. ‘It means we are paid for the activity we deliver,’ she said. ‘We work at 100% capacity and every additional patient has to be outsourced and costs more than the tariff pays.’ Although she acknowledged that a small element of funding was now linked to quality, she said more needed to be done to ‘really understand what represents quality’. Angela Phillips, finance director at Stockport PCT, representing commissioners on the panel, suggested that changes were needed to the existing mechanisms to avoid providers getting paid twice if a poor quality intervention led to a further patient episode.  However some delegates argued that patient choice already provided incentives to get treatment right first time as patients and GPs would elect to use other providers.

The Department of Health this year has set non-mandatory tariffs for a number of areas including unbundled diagnostic imaging associated with outpatient attendances and outpatient procedures. In many areas, adoption of the non-mandatory outpatient procedure tariff would have produced financial pressures for PCTs and local agreements have been put in place. The conference was split over whether the existing tariff was affordable in the current economic climate. Some 39% believed it was affordable, 39% disagreed while the remaining 22% were still uncertain.  Ms Phillips argued that simple maths – the current tariff times the current activity – suggested it was unaffordable. However she said this could not necessarily be ‘pinned on the tariff’. And Ms Tomkinson said the tariff was not the problem but the ‘inflexibility of how it was imposed’. She added with mature relationships and the ability to broker around the rules, it was workable.

Mr Hardy argued that there was evidence that it was affordable. ‘We’ve got the tariff at the moment and we’ve got a significant NHS surplus, so is it a problem?’ he asked.  One FT delegate argued that if the tariff was ‘unaffordable’, PCTs needed to do make a reality of demand management plans. Ms Phillips acknowledged that reducing demand was complex for PCTs who rely heavily on GPs. But she added that the availability of supply was also a key factor in demand, with service availability leading to the lowering of referral thresholds. A majority of delegates (68%) identified affordability as the primary focus of contract negotiations under the national tariff.

Delegates also voiced concern over the ability of the tariff to incentivise partnership and co-operation. Speaking later at the conference, Department of Health director general of NHS finance, performance and operations David Flory said that the Department was keen to ensure the incentives in the payment system were more supportive of joint working to produce the right care pathways. ‘We can be more helpful by finding ways to incentivise or reward people for giving up work rather than automatically penalising them,’ he said.  

Looking at other potential tariff developments, two thirds of delegates believed bundled tariffs or tariffs covering whole patient pathways would provide better incentives. Panel member Martin Shaw, finance director of Guy’s and St Thomas’ NHS FT and chairman of the HFMA FT Finance group, said that simply bundling together what was already undertaken in the acute sector would not change behaviours. Bundling needed to extend beyond the acute sector and this would need the creation of an ‘outside hospital’ tariff.

Asked to identify a single step that would most improve the current tariff, equal numbers of delegates (31%) prioritised setting more prices normatively and improving costing at the local level (so providing a more robust data source for the national tariff). But smaller numbers of delegates also backed greater use of best practice tariffs, using a sample of providers with costing information at the patient level to set the tariff and making service line reporting compulsory. Debate chairman Chris Calkin said service line management was starting to have an impact in a number of organisations, helping to engage clinicians in financial management. ‘The pace is slow but we are starting to see an impact,’ he said.  In reality delegates suggested that a combination of measures would be needed to help refine the tariff.

Despite demanding efficiencies of 3% and 3.5% built into the tariff uplift for 2009/10 and 2010/11, 83% of delegates said the efficiency requirements were achievable (3% easily, 79% with difficulty). One in 10 believed the efficiencies were unrealistic while 7% said it was too early to say.