Activity-based funding for National Health Service hospitals in England: managers’ experience and expectations

Abstract

Activity-based funding of hospital services has been introduced progressively since 2003 in the National Health Service (NHS) in England, under the name 'Payment by Results' (PbR). It represents a major change from previous funding arrangements based on annual "block" payments for large bundles of services. We interviewed senior local NHS managers about their experience and expectations of the impact of PbR. A high degree of 'NHS solidarity' was apparent, and competition between NHS hospitals was muted. PbR has been introduced against a background of numerous other efficiency incentives, and managers did not detect a further PbR-specific boost to efficiency. No impact on care quality, either positive or negative, is yet evident.

An economic analysis of money follows the patient

“…A similar finding was reported by Kjerstad [28]. Also, where hospitals are already operating at full (or near full) capacity there is little scope to increase volume [19].…”

“…Thus, responsibility for the local health economy is presumably more obscure than Sussex and Farrar [19] found for the UK.…”

“…ABF systems generate incentives to increase number of patients treated, reduce cost per case [11] and increase the quality of coding [16,17]. However, unintended and less desirable incentives emerge, include skimping on quality, which imposes pressures on other parts of the health system [11,18,19], upcoding [19,20] and cream-skimming [18,19]. As well as these there are additional economic issues associated with MFTP such as its role in increasing competition between hospitals; the effects of procedure pricing on behaviour; distorting health system priorities and the role of economic evaluation in designing best practice pathways.…”

“…According to Sussex and Farrar [19] in a survey of health managers, this was less of a concern in the NHS owing to the close relationship and altruistic culture between hospital trusts and primary care trusts (PCTs). Those surveyed felt that both hospital trusts and PCTs took joint responsibility for the local health economy, focusing on serving patients rather than advancing the interest of individual organisations at the expense of others [19]. In Ireland, Ruane [29] referred to Primary, Community and Continuing Care (PCCC) structures as being fragmented, with a mix of public and private hospitals and public and private payers.…”

Paying for hospital care: the experience with implementing activity-based funding in five European countries

“…As noted above, though, factors other than the introduction of activity-based funding may have affected this outcome. For example, in England, the introduction of activity-based funding was contemporaneous with large funding increases to the NHS and the use of other policy instruments, such as waiting time targets, so isolating its specific impact is virtually impossible (Propper et al, 2007;Audit Commission, 2008b;Farrar et al, 2009; see also Sussex and Farrar, 2009). Not only has hospital activity increased in absolute terms but there has also been a change in its composition.…”