Pace check

The payment system in England is broken and needs replacing. Few people would argue with this. But what will replace it and how close is the NHS to having that replacement ready?

Some areas would already say the national tariff – or payment by results, its original title – has already run its course and has in any case only reached as far as the acute sector. Activity-based contracts in some areas have given way to block arrangements with loose agreements about risk-sharing for activity overruns.

The future is likely to be about capitation-based budgets supporting place-based contracts that drive integrated care within accountable care systems (ACSs) or, to give them their new name, integrated care systems (ICSs). But the view that ‘payment by results is all bad’ may be too simplistic.

Matthew Style made exactly this point at the HFMA annual conference in December. The NHS England director of strategic finance warned against accountable care systems adopting simple block contracts and argued that there were benefits within payment by results that should not be lost.

The tariff has certainly led to improvements in coding and costing – which are valuable in their own right, not just because they lead to more ‘accurate’ payment. It has helped to reinforce good pathways through best practice tariffs and established a legitimate link between activity and costs. And it has, in some areas, helped to engage clinicians in service line management and cost improvement.

The tariff also potentially has a role going forward even if it isn’t used as the main system of payment. It provides a mechanism for payment between systems where no formal contract exists – from one ICS to another, for example. And it may well provide the best initial mechanism for calculating baseline contract prices for the new capitation-budgets.

Throw out the tariff and you may be left with crudely rolling forward existing contract values and fixing capitation budgets at historic cost levels that take no account of procedure-specific service developments or efficiencies.

People often point at the UK nations outside of England. They don’t have a tariff and, some argue, are therefore better placed to move services between acute, community and mental health – and perhaps even social care – as a result. There is some substance to this – and many say it is only political dogma that keeps England clinging on to the remnants of its market system.

However, it is interesting to note that the recent independent Welsh review of health and social care recommended introducing a ‘more creative set of financial incentives (revenue, capital and transformation funding) such as pay for performance, pay for quality (including productivity).’ It also wanted users to be empowered to choose services from different NHS providers, which implies some form of tariff or payment system for cross-health board flows.

The reality is that the future of healthcare payment is likely to involve a number of approaches. There is already good work going on to develop capitation-budgets with outcome-based incentives and risk-sharing arrangements. But it is relatively low profile.

The new models of care need to come first, which can then be underpinned by new payment approaches. However, more could be done in parallel. The service would benefit from understanding more about these emerging approaches and the relative value between adopting an already tried approach and starting from scratch in each locality.

It would also help to have a steer from the system leaders – with NHS England, NHS Improvement and NHS Digital all having roles in currency development, pricing and cost data collection. They have not been completely silent – last year’s Whole population handbook was helpful. But this is an area where the service could and should be making more progress and faster.

New work by consultancy PwC and the HFMA is hoping to contribute to this debate by examining how current funding flows, including the national tariff, could be changed. Finance managers are often best placed to understand what is and isn’t working in the current system and what would support the development of new care models. And a survey as part of this work will offer them the chance to have their say.