Comment / Why we must get payments right

Payment systems have a big role to play in delivering transformed NHS services – services that deliver the same and better quality to patients amid higher demand and anticipated real-terms flat settlements in the medium term. It is a big role, but it is a supporting role. On their own, payment systems, however well designed, won’t deliver integrated care, redesigned pathways or whole-economy working.

But payment systems do need to facilitate these changes – not act as an obstacle to reform because the finances don’t work out. They need to be fair, ensuring that they provide adequate funding to deliver services to the highest standards. And they need to provide a firm foundation on which organisations can plan with confidence, so they can make decisions about future service developments, as well as concentrating on the here and now.

So payment systems are important and we need to get them right. At the beginning of the summer, the HFMA, the King’s Fund and Monitor pulled together finance leaders from across England to discuss how payments systems had to change. We started by identifying the benefits that have come from the introduction of payment by results: greater focus on quality rather than cost in annual negotiations; having clear rules rather than everybody doing their own thing; and a greater opportunity to bring clinicians and managers together to investigate clinical and cost variation at organisation and service line level. So point number one is to take the benefits with us into the new system.

But times and priorities change, and the payment system needs to change too to support the delivery of greater integration, pathway change and whole-system working. The workshop identified the key characteristics for a reformed system. You can read more in Future payment systems in the NHS (included with this issue), but our focus group highlighted a number of must-haves.

Any new system must provide for full coverage. That doesn’t mean national prices for everything and it doesn’t mean a single model for payment. We will almost certainly need a range of approaches – price per procedure and population-based budgets or year-of-care tariffs and flexibility within that – but all services need to be covered. We can’t have a rules-based system for just part of a provider’s activity.

Who would argue against introducing links between payment and outcomes? But we need to understand what this means in practice. How do we measure meaningful outcomes? When do we measure the outcome? And when exactly would the payment or adjustment be triggered?

We need to ensure the payment system incentivises transformation, but we need to keep stressing that this won’t be the driver for change – patient need and quality will. And we must avoid commissioners or providers being penalised for making changes because the money doesn’t flow in the right way.

The good news is that a lot of what we identified at the workshop is reflected in the reports from Monitor and NHS England about future payment approaches, subject to consultation over the summer. Both bodies have been open and engaged in plans for future reform and this is something that must be applauded.

As a finance function, we must understand the challenges and recognise that solutions won’t appear overnight. We also need to stay engaged as the

design process continues. The payment system has a key role in transformation and there are few better placed than finance practitioners to assess the practical implications of proposed changes and make them a workable reality.

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