Payment by Results – 2011 Update

Tim Heymann and Geoff Sandle - BSG Information Group

Payment by Results (PbR) describes the way in which hospitals are paid for what they do. The system was introduced for a limited number of hospital services in 2005/06 with the aim of providing a transparent, rules-based system for paying providers. Since then the scope of PbR has increase to cover approximately 70% of hospital services. In theory it should reward efficiency, support patient choice and diversity and encourage activity for sustainable waiting time reductions. Payments are linked to activity and adjusted for casemix. One ambition has been to ensure a fair and consistent basis for hospital funding.

Payments are linked to the HRG (Healthcare Resource Group) derived for each patient's time in hospital (the period from admission to discharge) , the resources that they need and use such as staff time, bed days and consumables. Broadly the PbR tariff reflects the actual costs of each HRG. Those costs are calculated from the national average reference costs which every NHS provider submits. The tariff can then be adjusted at Department of Health (DH) discretion each year, for instance to encourage efficiency. This year tariffs have been set at 1% below the last year's mean reference costs. They have been adjusted to promote new ways of working: for instance the PbR tariff is set at zero for patients who are readmitted within 30 days of discharge following an elective admission. That is meant to encourage safe, appropriate discharge and the development of “re-enablement” services in the community. Tariffs are also adjusted to acknowledge unavoidable differences in operating costs in different parts of the country, so are higher for care in central London hospitals than in provincial centres such as Truro. Supra regional services such as transplants, and some specialist treatments e.g. chemotherapy, specialist rehabilitation and high cost drugs do not currently have mandatory national tariffs and are left for local negotiation.

PbR tariffs depend crucially on the accuracy of HRGs and the reference costs that providers submit. For example since PbR tariffs for endoscopy currently do not differentiate between simple and more complex procedures, the tariff for a simple endoscopy may be overestimated and the true cost of more complex endoscopy underestimated. This creates a problem if simple procedures are done by independent providers, leaving the complex but 'less profitable' cases to be done by an incumbent NHS provider.

PbR tariffs are updated annually to reflect changes in practice, changes in procedure coding, to capture more patient activity and to correct anomalies as they become apparent. Some points of particular relevance to BSG members are as follows:

  • 'Day case' endoscopies are considered to be outpatient procedures as patients generally do not need to occupy a bed before or after the procedure.
  • HRGs are derived from the most resource intensive procedure: for instance a 'top and tail' is reimbursed at the upper GI tract endoscopy rate only though from next year new endoscopy HRGs will be introduced which should include 'top and tail' specific HRGs.
  • Flexible sigmoidoscopy and colonoscopy attract the same tariff. (Again from next year HRGs should differentiate by type and purpose of endoscopy so should generate different tariffs).
  • There is a big difference between elective (£394) or non elective (£874) tariffs, since the tariff is intended to reflect and pay for the whole emergency admission. Upper GI tract tariffs appear more generous (£416 and £1034 respectively).
  • Upper GI bleeding has a different tariff system to reflect the high costs of an emergency admission for bleeding.
  • The tariff for capsule endoscopy (£533) barely covers the capsule cost, we assume a result of incorrect cost reporting by providers that does not factor in the cost of the capsules themselves. We hope that this will be corrected as providers suffer the consequences of the information they have provided.
  • The tariff for oesophageal stenting (£3231) is more generous.
  • Last year, hepatology outpatients attracted a higher tariff than new GI patients. This year the situation has been reversed (£228 for hepatology, £287 for GI), though hepatology follow-ups attract a higher tariff than GI follow-ups (£149 vs. £90). New GI patients attract a higher tariff than general medical new patients (£214) but general medical follow-ups attract a higher tariff (£108) than GI follow-ups. These tariffs reflect the actual costs reported in the reference costs submitted by providers suggesting a change in accounting practices rather than practice or true costs.
  • Non-face-to-face consultations, whether by e-mail, telephone or via a relative are in theory chargeable, but only if they replace face-to-face consultations for which the relevant tariff would have been charged. The contact has to allow for a discussion between the doctor and patient. Simply phoning or e-mailing through a test result does not qualify for payment. In any case the non-face-to-face consultation tariff is only £23.

HRG definitions and PbR rules are constantly in flux. It seems unlikely that the proposed NHS reforms will affect them directly, though there may be attempts to strike deals with providers that undercut tariffs, even when the tariffs are supposed to be mandatory. On our behalf, John Ramage and Stirling Pugh are working to maintain a sense of realism in discussions, at least about the HRGs. We thank them for their determination to make HRGs, so PbR work and their dedication to the Kafkaesque worlds of NHS coding and funding which they inform on our behalf.