Options for the Future of Payment by Results (PbR) Consultation Exercise

1. Options for the Future of Payment by Results (PbR) – Consultation exercise Sebastian Habibi – May 2007

2. What is Payment by Results? • PbR is about linking funding to patient care: • What is being provided? (i.e. currency/product definition) • What information do providers need to collect and transmit in order to claim payment? • What other information is needed to monitor quality/outcome? • What is the price? • What’s the relationship between price and volume? Currency and Price Patient Care Funding Information Flows

3. Ch. 1 – Setting the scene • Consultation document: 16 March • 14 week consultation, deadline for responses: 22 June • 3-year development cycle: 2008/09 to 2010/11 • PbR is increasing transparency in the dialogues between commissioners and providers, managers and clinicians • PbR built with tools that were available at the time • Now that people are using PbR, its strengths, but also its weaknesses are becoming clear

4. Ch. 2 - Clinical & financial data are fundamental ‘building blocks’ of PbR ‘Grouped’ data Patient-level data

5. Ch.2 - Strengthening the ‘building blocks’ of PbR (1) • Classification system for diagnoses and procedures • Existing system not sustainable for the long-term • Interim solution - annual updates (2008/09 & 2009/10) • DH and CfH are evaluating systems being used in Australia and elsewhere as potential replacements (report in July 07) • Potential replacement in 2010/11 • Currencies (i.e. patient groupings) • Currencies for 2008/09 tariff will continue as now (HRG3.5) • Improved currencies (HRG4) introduced as basis of tariff from 2009/10 • Ongoing refinement informed by international experience of Diagnoses Related Groups (DRGs) • Costing • Patient-level costing introduced from April 2007 • Will inform tariff calculation from 20010/11

6. Ch. 3 - Developing the National Tariff (1) • Calculating the tariff from a sample of providers • Accredited patient-level costing sites • Potential to set prices based on costs of most efficient providers • Normative pricing to reflect ‘best practice’ • ‘Best practice’ models deliver high-quality and cost effectiveness • Targeted approach focussed on high-volume HRGs • Currently considering 6 treatments based on evidence from Institute’s initial studies • Quality premia - but paid at contract level ?

7. PbR should support commissioning based on ‘pathways’…….

8. Getting the right tariff structure is a balance of ‘bundling & unbundling’ • Bundling components of care together can help reduce variation in cost and outcome for similar groups of patients • But, can also reduce flexibility to tailor services around patients’ needs and individual choices….. • Unbundling the tariff • HRG4 introduces more granularity in tariff structure • Principle is that unbundling should take place where: • Service items are commissioned direct from primary care; or, • High-cost, low volume items are unevenly distributed Q. Are there examples of where the tariff acts as a barrier to commissioning care pathways and, if so, what changes to the tariff structure would help overcome these problems (i.e. bundling or unbundling)?

9. Ch. 3 - Developing the National Tariff (2) • Specialised services • Better differentiation under HRG4 • International evidence indicates a continuing role for top-ups, exclusions and support for single-specialty Trusts • Applying the tariff to the same service provided in different settings • Potential to ‘group’ activity delivered in OP and community settings from 2008/09, but requires coding as per admitted patient care • Consultation & data analysis to inform decision on combined vs separate tariffs • How tariff supports plurality of providers: fair playing field?

10. Ch.4 – Future of Tariff-Setting • Priority is to improve transparency and competency in underpinning process • Costing • Sampling techniques • Stakeholder involvement • Establishment of Clinical Advisory Panel to ensure appropriate clinical involvement in decision-making • Chaired by Dr Ian Rutter (GP and clinical advisor to DH on health reform) • No current proposals to devolve responsibility for tariff-setting to an independent body

11. Ch. 5 Extending the scope of PbR to other services 3 generic models: • Local currency, local price • National currency, local price • National currency, national price Potential to progress through models where appropriate and subject to data on activity and cost. No assumption of national tariff for everything

12. Is a national currency appropriate for a particular service? Is it necessary? • Would a national currency support commissioning objectives (e.g.; patient choice; shifting care; national benchmarking)? Does it make sense? • Are services sufficiently standardised across different local areas? Are conditions right? • Are data collection systems and information flows sufficiently standardised? • If not, are the costs of introducing standardised data collections and information flows outweighed by the benefits?

13. Where are we going? • New national currencies (HRG4) developed: • Critical Care • Radiology • Chemotherapy • Radiotherapy • Renal Dialysis • Specialist Palliative Care • Ongoing national projects: • Pathology • Rehabilitation • Mental Health* Meanwhile, people are getting on and commissioning services using local currencies, we are keen to support the development of good practice as national exemplar Potential for use as currencies for national tariff in 2009/10 (decision in summer 2008) Potential to introduce national currencies and indicative tariffs by 2010/11

14. Piloting new ideas – ‘PbR Development Sites’ • Evolutionary approach to developing PbR must encourage innovation at local level • We will work with SHAs/FTN to establish a limited number of PbR Development Sites for piloting: • Local currencies for services outside the scope of the national tariff • Alternative currencies or funding models for services already covered by tariff (n.b. projects would not involve changes to price alone).