Payment by results and practice based commissioning

Noel Plumridge

Hammersmith

10 March 2005

The strategic context is changing:

CHOICE

DEVOLUTION

PLURALITY

INVESTMENT

Money flows with

the patient

3 year PCT allocations, Foundation Trusts - need for national standards & accountability

Largest ever sustained increase in NHS funding - 75% held at local level

DTCs, Foundation

Trusts, Franchising, Independent sector, PCTs

Payment by Results consultation – autumn 2003

Payment by Results is the essential building block for this model

Why Payment by Results?

• Key Government policy drivers/values: - plurality of provision - equality of access - consumerism

• The Department of Health requires: - operational efficiency (the price of

investment) - assurance that public money has been well

spent - more capacity (to meet access targets)

Payment by Results: The Basics

• A national tariff as the basis of funding - derived from NHS reference costs - adjusted for regional cost variations• Payment for activity actually delivered - activity defined by Healthcare Resource Groups

(HRGs) - activity measured in “spells” (not FCEs or OBDs)• Primary care trusts as commissioners• Service level agreements

Payment by Results: The Real Basics

Quantity x price = income (for around 30 per cent of hospital

activity in 2005-06)

Payment by Results – Some Big Issues

• Applicability outside of acute care - chronic illness - mental health - “community”• Availability of information• Investment• Preparedness• Risk management

Payment by Results – Recent Developments

• Trials within new foundation trusts during 2004-05• Extending HRGs, especially into specialist care and

mental health• Capping “windfall gains” – or foundation trust

“freedoms”?• David Nicholson’s 2004 review• Bradford!• Removal of emergency treatment from 2005-06

tariff, except in foundation trusts

The Combined Impact of PbR, Patient Choice and Provider

Diversity

• What happened to the “gatekeeper” role?

• Competition between providers• Provider marketing to GPs and patients• Increased capacity• Pressure on staffing, our main capacity

constraint• Uncertainty! Multiple untested changes,

implemented quickly…

A Return to the NHS Internal Market?

What will be the combined effect of :• payment by results?• patient choice?• provider diversity?• practice-based commissioning?

A Broader Context?

• A historical perspective - 1900-1950: infectious disease - 1950-2000: making acute hospitals more effective, then more efficient - 2000-? : managing chronic disease• Major new NHS initiatives in 2004 - “Wanless 2” and public health improvement - chronic disease management

“The health care model in the developed world is not sustainable with the rising tide of chronic disease”.

(Sir Liam Donaldson, May 2004)

10% of inpatients account for 55% of all inpatient days.

5% of inpatients account for 42% of all inpatient days.

Percentage of those admitted as inpatients by cumulative days spent as inpatients

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Percentage of inpatientsCu

mu

lati

ve p

erce

nta

ge

of

inp

atie

nt

day

s

Source: Analysis of British Household Panel Survey

50% of inpatients account for 10% of all inpatient days.

Respiratory Illness: Is This the Care Pathway We Want?

9.00am. My chest feels tight

today

l

1.30pm. Wonder if I could get in to see

my GP…

8.00pm. You’d better go down to A&E, just to be on

the safe side10.00pm. We’ll

keep you in overnight, just in

case

While you’re here we’ll just do a few

tests…

Competing Priorities?

• Is there an inconsistency between:

- Payment by Results, which rewards efficiency in acute hospitals and pays by the “spell” in hospital; and

- models of chronic disease management (such as Evercare) which see hospital admission as a failure?

• Have we already solved the problem that Payment by Results is meant to fix?

Commissioning Progress 1999-2004

• Limited progress towards NHS Plan targets• Reduction in meaningful activity data• Priority has been to balance books• PCT and trust financial deficits increasing• Increased public and political concerns about

service• Practice-based commissioning reintroduced!

(Tim Richardson, GP – Director,

Epsom Day Surgery Ltd)

Why practice based commissioning? And why

now?

• To encourage GP involvement in service improvement and shift balance of care from secondary to primary care

• Because without GPs the NHS can’t manage demand for acute care

• “Because PCTs have failed” (?)

(Views from IPF workshops in London and Birmingham, February-March 2005)

The NHS Alliance – February 2005

• Serious concerns about discharge information.• PbR allows payments to be made regardless of

whether the GP has received clinical discharge information. GPs “could find they have no way of checking costs, nor of correcting any errors”.

• Proposal: “without discharge information, the payment would not be approved. Then GPs who opt to manage a practice budget … would be able to check that charges for patient care are accurate”.

Bradford Hospitals Foundation Trust

• From April to August 2004, North Bradford PCT generated 3,014 queries out of 9,178 inpatients billed by the Bradford trust.

• The amount queried (£2.4 million) represented 21 per cent of the total amount billed.

• Of the queries: 1,359 “appear to be administrative” 1,444 based on differences in the interpretation of in-patient admissions suggesting a potential “denial rate” of 9 per cent.

Bradford Hospitals Foundation Trust

The financial impact of PCT challenges:• “BTH have estimated that Basic Clinical Income at risk is

£5.1 million for FY 2005 … Based on the queries raised by North Bradford PCT in the YTD, one of the large PCTs, and a predicted denial rate of 9%, we believe that the actual income at risk could be £11.3 million.”

• “Assuming that PCTs hold payments of disputed amounts in February and March and given a query rate of 21%, the potential lag in cash receipts could add £3.7 million to the cash requirement in the current financial year.”

(Alvarez & Marsal, confidential report

for Monitor, December 2004)

Risks identified at the London and Birmingham IPF workshops

• “Not that big a risk really, as long as there are reporting mechanisms and controls”

• “What savings?”• Mismatch on timing cf

LDP• “Postcode lottery”• Loss of focus on health

inequalities

• GP non-engagement• Lack of management

capacity/information• Loss of PCT staff• GP disengagement

from clinical networks• Inefficiency:

commissioning needs a critical mass

Turn these on their head for an implementation checklist!

Some GP responses from the London and Birmingham IPF workshops

• “Until you offer us budgets, how can we know whether we’re interested?”

• “Who will pay for the overheads, and how much? Under fundholding we got hard cash.”

• “This is about shifting the blame [for rationing] to GPs”

• “I’d do it to improve the way patients are treated, but not so that I can second-guess the information people”

• “Never mind clinician engagement, what about management engagement?”

Payment by results and practice based commissioning

Noel Plumridgenoelplumridge@aol.com

020-8399 6223

With acknowledgements to the Department of Health and Monitor for the use of some slides and supporting material