PAYMENT BY RESULTS

1. PAYMENT BY RESULTS The Effect of National Tariffs on Coronary Revascularisation Stephen Holmberg Sussex Cardiac Centre

2. PAYMENT BY RESULTS • What is it? • Why have it? • How does it work? • What are the problems? • Are there solutions?

3. WHAT IS PAYMENT BY RESULTS ? • Specific procedures/diagnoses identified as Healthcare Resource Groups (HRGs). • National tariffs determined for HRGs. • Providers reimbursed for actual work performed. • So what is the problem?

4. …UNDER THE OLD SYSTEM (1) • Most healthcare delivered as part of block contracts. • Rough agreement on costs and volumes. • Targets relatively broad and rarely met. • True costs poorly understood.

5. …UNDER THE OLD SYSTEM (2) • Little control for healthcare commissioners. • Agreed contracts rarely reflected activity • Money moved around within Trusts. • Savings from one area used to fund inefficiencies in another • Funding used for different treatments other than those agreed • Difficult to compare costs between different providers

6. & PAYMENT BY RESULTS? • Supports patient choice and encourages hospitals to respond to patient preferences • Encourages commissioners to provide effective care in the most appropriate settings • Rewards hospitals fairly for the work they do • Increases the transparency of hospital funding • Imposes a sharper budget discipline on hospitals Audit Commission – “Payment by Results”

7. THE POLITICAL GAINS • PbR creates a “universal currency” for procedures/conditions. • Dismantles traditional levers of power used by Hospitals and Doctors to frustrate NHS control. • May facilitate the movement of patients to more prompt and better quality treatment. • Guarantees healthcare returns for funding.

8. THE ORIGINS OF PbR • Diagnostic Related Groups (DRGs) were introduced in 1982/83 • Purpose was to measure hospital efficiency • No intention to use system for finance • Structure “adapted” as basis for government reimbursement plans as Healthcare Resource Groups (HRGs)

9. HOW ARE THE TARIFFS SET? • Trusts canvassed for prices of procedures • Based on poor data • Huge variation in price returns • e.g. Pacemakers £58 - £30,000 !! • Tariff based on 2 year retrospective returns • PCI tariff subject to 20% for “medical inflation”

10. THE COST OF ELECTIVE PCI

11. WHO CHARGED WHAT? • THE “HIGHROLLERS” OF PCI • £4848 RW3 • £4279 RJ5 • THE “POUNDSTRETCHERS” • £167 RKB • £344 RH8 • £354 RHW • £374 RXC • £780 RTE

12. WHO CHARGED WHAT? • THE “HIGHROLLERS” OF PCI • £4848 RW3 Central Manchester • £4279 RJ5 St. Mary’s, London • THE “POUNDSTRETCHERS” • £167 RKB Coventry • £344 RH8 Exeter • £354 RHW Reading • £374 RXC Eastbourne • £780 RTE Gloucester

13. WHAT ARE THE PROBLEMS? • Is there enough money in the tariff? • The system should reward best practice. • Current arrangements may not permit this. • Casemix • New Technologies • “Headline Charging”

14. 2003/4 PCI Elective £3326 Non-Elective £4357 CABG Elective £8080 Non-Elective £9863 2004/5 £3144 £4849 £7101 £9429 THE TARIFFS

15. WHY THE CHANGES? • Market Forces Factor (MFF) removed. • Tariff set at lowest MFF • Providers reimbursed separately for MFF • MFF 1.0 – 1.4 • 1.0 – West Cornwall • 1.4 – St. Mary’s, London • £21 million added for DES • Assumes 50% use at +£700

16. ISSUES OF CASEMIX • Tariff is probably sufficient for “simple” PCI • How is “complex” PCI funded? • Risks • Best Practice NOT followed • “Inappropriate” procedures • “Cherry-picking” of cases by provider • Staging of procedures • “Unnecessary” surgery

17. NEW TECHNOLOGY • Tariff based on retrospective costs • No opportunity to raise charges once PbR is running • NHS decides how to implement funding of NICE Guidance e.g. DES • 2 year “passthrough” available but at discretion of PCTs • 2005-6 changes at least permit some flexibility

18. HEADLINE CHARGING • 68 y.o. with AMI • Medical Treatment, Elective Angio, Elective PCI • £3029+£809+£3326 = £7164 • Medical Treatment + i.p. Angio, Elective PCI • £3672+ £3326 = £6998 • Medical Treatment + i.p. Angio & PCI • £4849 • Medical Treatment + i.p. Angio & Transfer for urgent PCI • £3672 + £4849 = £8521

19. HEADLINE CHARGING (2) • 72 y.o. with ACS • Medical Treatment, Elective Angio, Elective PCI • £1963+£809+£3326 = £6198 • Medical Treatment + i.p. Angio, Elective PCI • £3672+£3326 = £6998 • Medical Treatment + i.p. Angio & PCI • £4849 • Medical Treatment + i.p. Angio & Transfer for urgent PCI • £3672+£4849 = £8521

20. WHERE IS REIMBURSEMENT GOING? • 2003-2004 Indicative tariffs introduced • 2004-2005 Tariffs apply to certain HRGs • Including PCI (Marginal Activity) • All activity in Foundation Trusts • 2005-2006 Most HRGs covered by tariffs • Now Elective Procedures only (except FTs) • 2008-2009 Payment by Results will be funding basis for >90% of healthcare delivery

21. LESSONS FROM OTHER COUNTRIES • Is the UK simply falling in line with other health economies? • 600 HRG codes cover all activity • USA • 400 codes cover 40% of activity • Multiple reimbursement levels per code • Truly activity based reimbursement • Germany

22. COLD FEET?A Slope to the Level Playing Field • Government acknowledges the threat of “Gaming”. • Concern over “financial volatility” • PbR NOT to be extended to additional emergency care HRGs – Waiting List tariffs only • “But this is not going soft on reform….we will still be implementing this new system more quickly than any other country”. (John Hutton)

23. THE UK POLICY TO INTRODUCE PAYMENT BY RESULTS ACROSS VIRTUALLY ALL HEALTHCARE WITHIN 5 YEARS IS WITHOUT PRECEDENT FROM ANY OTHER HEALTHCARE ECONOMY

24. CONCLUSION (1) • PbR represents both an opportunity and a risk • Fine detail will determine success or failure • Reimbursement levels are likely to drive clinical practice • The introduction of PbR is so rapid that major problems are highly likely • System may produce “Results by Payment” rather than “Payment by Results”

25. CONCLUSION (2) • The system can be made to work • Tariffs need to encourage best practice • Adequate funding • Casemix acknowledged • New Coding Systems (NIC) • Patient pathways identified • Networks must share financial risk • Mechanisms must exist to fund new “approved” technology