Current payment systems not suited to current challenges facing the NHS

Current model of payments not working
Published on Friday, 02 November 2012 09:11
Posted by Scott Buckler

The way the NHS currently pays hospitals for the work they do  - including 'payment by results'  - should change to incentivise new models of care concludes a report published today by The King's Fund

While recognising the positive impact that payment by results has had on the NHS in England, the report suggests that current payment system may be obstructing changes in services required to meet current and future health care needs.

The report finds that there is an urgent need to experiment with and evaluate new and innovative payment methods which will move away from a system primarily driven by a desire to boost activity rather than outcomes and facilitate more integrated care. It proposes that the NHS adopt an approach that enables local experimentation in payment systems within a clear national framework with a requirement for evaluation.

John Appleby, Chief Economist at The King's Fund and the lead author of the report said:

"Payment by results for hospital services was developed nearly a decade ago in order in part to drive a reduction in waiting times by encouraging more activity in hospitals. But the challenges facing the NHS have altered. Tinkering with payment by results will not support service changes increasingly recognised as necessary, and may even be obstructing them. One size does not fit all when it comes to payment systems and radical changes in the blend of payment methods used in the NHS are essential in order to improve NHS performance and the quality of patient care."

Payment by results is broadly suited to elective care (where services are relatively easy to define for costing and pricing purposes ) and provides an to incentive to improve technical efficiency within acute providers.

However, payment by results has limitations, namely:

  • It is not well designed to promote or support larger scale shifts in care from hospital to other settings
  • It is not well suited to promoting continuity and co-ordination of care.
  • It provides almost no incentives for health promotion and disease prevention,
  • and does little to support improvements in the efficient allocation of funds or innovation.

The report therefore proposes the NHS adopt an approach to payment that maximises local flexibility but ensures greater transparency in pricing and the development over time of a more comprehensive set of national currencies and prices that better meet the needs of the health care system.

Source: Kings Fund

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