PAYMENT BY PAYMENT BY RESULTSRESULTS

The Effect of National Tariffs The Effect of National Tariffs on Coronary on Coronary

RevascularisationRevascularisation

Stephen HolmbergStephen Holmberg

Sussex Cardiac CentreSussex Cardiac Centre

PAYMENT BY RESULTSPAYMENT BY RESULTS

What is it?What is it? Why have it?Why have it? How does it work?How does it work? What are the problems?What are the problems? Are there solutions?Are there solutions?

WHAT IS PAYMENT BY RESULTS ?WHAT IS PAYMENT BY RESULTS ?

Specific procedures/diagnoses Specific procedures/diagnoses identified as Healthcare Resource identified as Healthcare Resource Groups (HRGs).Groups (HRGs).

National tariffs determined for HRGs.National tariffs determined for HRGs. Providers reimbursed for actual work Providers reimbursed for actual work

performed.performed.

So what is the problem?So what is the problem?

……UNDER THE OLD SYSTEM UNDER THE OLD SYSTEM (1)(1)

Most healthcare delivered as Most healthcare delivered as part of block contracts.part of block contracts.

Rough agreement on costs and Rough agreement on costs and volumes.volumes.

Targets relatively broad and Targets relatively broad and rarely met.rarely met.

True costs poorly understood.True costs poorly understood.

……UNDER THE OLD SYSTEM UNDER THE OLD SYSTEM (2)(2)

Little control for healthcare Little control for healthcare commissioners.commissioners. Agreed contracts rarely reflected activityAgreed contracts rarely reflected activity

Money moved around within Trusts.Money moved around within Trusts. Savings from one area used to fund Savings from one area used to fund

inefficiencies in anotherinefficiencies in another Funding used for different treatments Funding used for different treatments

other than those agreedother than those agreed Difficult to compare costs between Difficult to compare costs between

different providersdifferent providers

& PAYMENT BY & PAYMENT BY RESULTS?RESULTS?

Supports patient choice and encourages Supports patient choice and encourages hospitals to respond to patient preferenceshospitals to respond to patient preferences

Encourages commissioners to provide Encourages commissioners to provide effective care in the most appropriate settingseffective care in the most appropriate settings

Rewards hospitals fairly for the work they doRewards hospitals fairly for the work they do Increases the transparency of hospital fundingIncreases the transparency of hospital funding Imposes a sharper budget discipline on Imposes a sharper budget discipline on

hospitalshospitals

Audit Commission – “Payment by Results”Audit Commission – “Payment by Results”

THE POLITICAL GAINSTHE POLITICAL GAINS

PbR creates a “universal currency” for PbR creates a “universal currency” for procedures/conditions.procedures/conditions.

Dismantles traditional levers of power Dismantles traditional levers of power used by Hospitals and Doctors to used by Hospitals and Doctors to frustrate NHS control.frustrate NHS control.

May facilitate the movement of May facilitate the movement of patients to more prompt and better patients to more prompt and better quality treatment.quality treatment.

Guarantees healthcare returns for Guarantees healthcare returns for funding.funding.

THE ORIGINS OF PbRTHE ORIGINS OF PbR

Diagnostic Related Groups (DRGs) Diagnostic Related Groups (DRGs) were introduced in 1982/83were introduced in 1982/83

Purpose was to measure hospital Purpose was to measure hospital efficiency efficiency No intention to use system for No intention to use system for

financefinance Structure “adapted” as basis for Structure “adapted” as basis for

government reimbursement plans as government reimbursement plans as Healthcare Resource Groups (HRGs)Healthcare Resource Groups (HRGs)

HOW ARE THE TARIFFS HOW ARE THE TARIFFS SET?SET?

Trusts canvassed for prices of Trusts canvassed for prices of proceduresprocedures

Based on poor data Based on poor data Huge variation in price returnsHuge variation in price returns e.g. Pacemakers £58 - £30,000 !!e.g. Pacemakers £58 - £30,000 !!

Tariff based on 2 year retrospective Tariff based on 2 year retrospective returnsreturns

PCI tariff subject to 20% for “medical PCI tariff subject to 20% for “medical inflation”inflation”

THE COST OF ELECTIVE THE COST OF ELECTIVE PCIPCI

PCI (Elective)

RA7

RAL

RBA

RBQ RCS

REF

RGM

RH8

RHM

RHQ

RHW

RJ1

RJ5

RJ7

RJE

RJZ

RK9

RKB

RM2RNJ

RQM

RQN

RR1

RR8

RRK

RRV

RT3

RTD

RTE

RTH

RTR

RV8

RW3

RWARWE

RXC

RXH

RXK

RXL

0

1000

2000

3000

4000

5000

6000

0 10 20 30 40 50 60

Co

st

(GB

P)

WHO CHARGED WHAT?WHO CHARGED WHAT?

THE “HIGHROLLERS” OF PCITHE “HIGHROLLERS” OF PCI £4848£4848 RW3RW3 £4279£4279 RJ5RJ5

THE “POUNDSTRETCHERS”THE “POUNDSTRETCHERS” £167£167 RKBRKB £344£344 RH8RH8 £354£354 RHWRHW £374£374 RXCRXC £780£780 RTERTE

WHO CHARGED WHAT?WHO CHARGED WHAT?

THE “HIGHROLLERS” OF PCITHE “HIGHROLLERS” OF PCI £4848£4848 RW3RW3 Central ManchesterCentral Manchester £4279£4279 RJ5RJ5 St. Mary’s, LondonSt. Mary’s, London

THE “POUNDSTRETCHERS”THE “POUNDSTRETCHERS” £167£167 RKBRKB CoventryCoventry £344£344 RH8RH8 ExeterExeter £354£354 RHWRHW ReadingReading £374£374 RXCRXC EastbourneEastbourne £780£780 RTERTE GloucesterGloucester

WHAT ARE THE PROBLEMS?WHAT ARE THE PROBLEMS?

Is there enough money in the tariff?Is there enough money in the tariff? The system should reward best The system should reward best

practice.practice. Current arrangements may not Current arrangements may not

permit this.permit this. CasemixCasemix New TechnologiesNew Technologies ““Headline Charging”Headline Charging”

THE TARIFFSTHE TARIFFS

2003/42003/4

PCIPCI Elective Elective£3326£3326

Non-ElectiveNon-Elective£4357£4357

CABG ElectiveCABG Elective £8080£8080

Non-ElectiveNon-Elective£9863£9863

2004/52004/5

£3144£3144

£4849 £4849

£7101£7101

£9429£9429

WHY THE CHANGES?WHY THE CHANGES?

Market Forces Factor (MFF) removed.Market Forces Factor (MFF) removed. Tariff set at lowest MFFTariff set at lowest MFF Providers reimbursed separately for Providers reimbursed separately for

MFFMFF MFF 1.0 – 1.4MFF 1.0 – 1.4

1.0 – West Cornwall1.0 – West Cornwall 1.4 – St. Mary’s, London1.4 – St. Mary’s, London

£21 million added for DES£21 million added for DES Assumes 50% use at +£700Assumes 50% use at +£700

ISSUES OF CASEMIX ISSUES OF CASEMIX

Tariff is probably sufficient for Tariff is probably sufficient for “simple” PCI“simple” PCI

How is “complex” PCI funded?How is “complex” PCI funded? RisksRisks

Best Practice NOT followedBest Practice NOT followed ““Inappropriate” proceduresInappropriate” procedures ““Cherry-picking” of cases by providerCherry-picking” of cases by provider Staging of proceduresStaging of procedures ““Unnecessary” surgeryUnnecessary” surgery

NEW TECHNOLOGYNEW TECHNOLOGY

Tariff based on retrospective costsTariff based on retrospective costs No opportunity to raise charges once No opportunity to raise charges once

PbR is runningPbR is running NHS decides how to implement NHS decides how to implement

funding of NICE Guidance e.g. DESfunding of NICE Guidance e.g. DES 2 year “passthrough” available but at 2 year “passthrough” available but at

discretion of PCTsdiscretion of PCTs 2005-6 changes at least permit some 2005-6 changes at least permit some

flexibilityflexibility

HEADLINE CHARGINGHEADLINE CHARGING

68 y.o. with AMI68 y.o. with AMI Medical Treatment, Elective Angio, Elective Medical Treatment, Elective Angio, Elective

PCIPCI £3029+£809+£3326 = £7164£3029+£809+£3326 = £7164

Medical Treatment + i.p. Angio, Elective PCIMedical Treatment + i.p. Angio, Elective PCI £3672+ £3326 = £6998£3672+ £3326 = £6998

Medical Treatment + i.p. Angio & PCIMedical Treatment + i.p. Angio & PCI £4849£4849

Medical Treatment + i.p. Angio & Transfer Medical Treatment + i.p. Angio & Transfer for urgent PCIfor urgent PCI £3672 + £4849 = £8521£3672 + £4849 = £8521

HEADLINE CHARGING (2)HEADLINE CHARGING (2)

72 y.o. with ACS72 y.o. with ACS Medical Treatment, Elective Angio, Elective Medical Treatment, Elective Angio, Elective

PCIPCI £1963+£809+£3326 = £6198£1963+£809+£3326 = £6198

Medical Treatment + i.p. Angio, Elective PCIMedical Treatment + i.p. Angio, Elective PCI £3672+£3326 = £6998£3672+£3326 = £6998

Medical Treatment + i.p. Angio & PCIMedical Treatment + i.p. Angio & PCI £4849£4849

Medical Treatment + i.p. Angio & Transfer Medical Treatment + i.p. Angio & Transfer for urgent PCIfor urgent PCI £3672+£4849 = £8521 £3672+£4849 = £8521

WHERE IS REIMBURSEMENT WHERE IS REIMBURSEMENT GOING?GOING?

2003-2004 2003-2004 Indicative tariffs introducedIndicative tariffs introduced 2004-2005 2004-2005 Tariffs apply to certain HRGsTariffs apply to certain HRGs

Including PCI (Marginal Activity)Including PCI (Marginal Activity) All activity in Foundation TrustsAll activity in Foundation Trusts

2005-2006 2005-2006 Most HRGs covered by tariffsMost HRGs covered by tariffs Now Elective Procedures only (except FTs)Now Elective Procedures only (except FTs)

2008-2009 2008-2009 Payment by Results will be Payment by Results will be funding basis for >90% of healthcare deliveryfunding basis for >90% of healthcare delivery

LESSONS FROM OTHER LESSONS FROM OTHER COUNTRIESCOUNTRIES

Is the UK simply falling in line with Is the UK simply falling in line with other health economies?other health economies?

600 HRG codes cover all activity600 HRG codes cover all activity USAUSA

400 codes cover 40% of activity400 codes cover 40% of activity Multiple reimbursement levels per codeMultiple reimbursement levels per code Truly activity based reimbursementTruly activity based reimbursement

GermanyGermany

COLD FEET?COLD FEET?A Slope to the Level Playing A Slope to the Level Playing

FieldField Government acknowledges the threat of Government acknowledges the threat of

“Gaming”.“Gaming”. Concern over “financial volatility”Concern over “financial volatility” PbR NOT to be extended to additional PbR NOT to be extended to additional

emergency care HRGs – Waiting List emergency care HRGs – Waiting List tariffs onlytariffs only

““But this is not going soft on reform….we But this is not going soft on reform….we will still be implementing this new system will still be implementing this new system more quickly than any other country”. more quickly than any other country”. (John Hutton)(John Hutton)

THE UK POLICY TO THE UK POLICY TO INTRODUCE PAYMENT BY INTRODUCE PAYMENT BY

RESULTS ACROSS RESULTS ACROSS VIRTUALLY ALL VIRTUALLY ALL

HEALTHCARE WITHIN 5 HEALTHCARE WITHIN 5 YEARS IS WITHOUT YEARS IS WITHOUT

PRECEDENT FROM ANY PRECEDENT FROM ANY OTHER HEALTHCARE OTHER HEALTHCARE

ECONOMY ECONOMY

CONCLUSION (1)CONCLUSION (1)

PbR represents both an opportunity and a PbR represents both an opportunity and a riskrisk

Fine detail will determine success or failureFine detail will determine success or failure Reimbursement levels are likely to drive Reimbursement levels are likely to drive

clinical practiceclinical practice The introduction of PbR is so rapid that The introduction of PbR is so rapid that

major problems are highly likelymajor problems are highly likely System may produce “Results by Payment” System may produce “Results by Payment”

rather than “Payment by Results”rather than “Payment by Results”

CONCLUSION (2)CONCLUSION (2)

The system can be made to workThe system can be made to work Tariffs need to encourage best Tariffs need to encourage best

practicepractice Adequate fundingAdequate funding Casemix acknowledgedCasemix acknowledged

New Coding Systems (NIC)New Coding Systems (NIC) Patient pathways identifiedPatient pathways identified

Networks must share financial riskNetworks must share financial risk Mechanisms must exist to fund new Mechanisms must exist to fund new

“approved” technology“approved” technology