Comment / Risk balance: key to PBR success

By Paul Briddock

Providers and commissioners need to work together and this will require risks to be shared appropriately across health economies

As we move towards the new commissioning structure on 1 April, we need to ensure we take whole health economy approaches to service improvement. Providers and commissioners need to work together – it cannot be a case of ‘us and them’. In terms of the payment and contracting system this must mean getting the right balance of financial risk across the whole of commissioning and provision.

Providers have struggled with the marginal rate emergency tariff in recent years – receiving only 30% of tariff for emergency admissions above a 2008/09 threshold. The complaints have been wide-ranging – the evidence for the 30% level and the fact that the baseline takes no account of any unavoidable rise in admissions in ensuing years are two frequently cited grumbles.

The aim of the policy was to incentivise closer working between providers and commissioners to keep emergency admissions to a minimum. Commissioners and providers will have different views on the balance between risks and incentives, but few would argue with the over-arching goal.

The final payment by results guidance for 2013/14 may not offer a major departure from the now seemingly established marginal rate policy, but it does provide some tweaks that appear sensible steps in the right direction.

For example, the Department of Health’s finalised guidance broadens the scope of what the 70% balancing payment can be spent on. It now

refers not just to demand management schemes but says that funds could be used to ‘reduce the incidence of and/or the consequences arising from emergency admissions’.

This seems sensible. The real goal here is to have fewer people in hospital if they can be more appropriately cared for in the community. Preventing inappropriate admissions is one side of this. But patients occupying hospital beds for longer than they need to, because of a lack of community support services, is surely also completely relevant. If funds could be used to fund a home physiotherapy service, for example, perhaps more patients could be discharged earlier. And the overall goal – only having people in hospital who need to be in hospital – would be achieved.

Providers may feel the balance of risk on the marginal rate still weighs against them. Some at a recent meeting of the HFMA PBR Special Interest Group would prefer to see a more equal sharing of risk with a 50% rate, perhaps with a requirement for trusts (rather than commissioners) to demonstrate that they are spending funds on reducing avoidable admissions.

But what appears to be slightly greater flexibility on use of funds, coupled with enhanced guidance around earlier engagement on business case proposals and new case studies of good joint working, is welcome.

Risk sharing is key across the whole of the PBR system. We want tariffs to provide the incentives and fair remuneration. We don’t want to cause unnecessary instability by moving too fast. But we equally don’t want to completely nullify the more accurate tariffs or incentives we’ve created.

It is a delicate balance. The new maternity pathway – mandatory this year – is a good example. To avoid major impacts on provider or commissioner finances, potential gains or losses ‘should be shared’. While the guidance is not as definitive as the 50:50 sharing preferred for chemotherapy delivery or the newly unbundled diagnostic imaging, the message is clear. We are in this together and we need to work together to achieve shared goals.

That has to be a message that both commissioners and providers take into this year’s contracting round.

Paul Briddock is chairman of the HFMA Payment by Results Special Interest Group