Payment by Results in the UK National Health Service Charles Carson April 2008 Development of National Coding Standards within the Czech DRG System

Acknowledgement This presentation relies heavily on recent papers by The King’s Fund, London, to whom full acknowledgement is given. For more information, please refer to _by.html Development of National Coding Standards within the Czech DRG System

So: how did things change? A new agenda emerged in October 2002, when the Department of Health published ‘Reforming NHS financial flows: Introducing Payment by Results’ This laid out far-reaching changes to how money moved round the NHS, and set up incentives for NHS hospitals to behave more like businesses in the future. Development of National Coding Standards within the Czech DRG System

Payment by results aimed to increase the amount of work done by hospitals, especially in specialties with long waiting times, such as hip operations. It also opened up the way for money to begin to follow patient choice. Development of National Coding Standards within the Czech DRG System

Under payment by results, hospitals are now moving away from locally negotiated block contracts. These allowed for considerable variations in prices for operations across the country, compared to their actual costs to hospitals (although the calculations have often been rough and ready). In addition the block contract system meant that hospitals were often paid even when they under- performed, failing to carry out number of operations required of them under the contract. Development of National Coding Standards within the Czech DRG System

How does Payment by Results work? Under payment by results, hospitals are paid only if an operation or treatment is carried out. The Department of Health has drawn up a long list of procedures, such as hip replacements or treatment for heart attacks, each with its own Healthcare Resource Groups (HRG) code. Development of National Coding Standards within the Czech DRG System

How it works… There are more than 1,000 HRG codes, designed to capture all the treatments and procedures that a patient might have while in hospital for a particular condition or operation. Similar coding systems exist in many other countries. Development of National Coding Standards within the Czech DRG System

How it works… Most importantly, the price of each HRG procedure or treatment is fixed in relation to a national tariff, based on its average cost across the NHS. Development of National Coding Standards within the Czech DRG System

What changes will it bring? Payment by results means a hospital will be paid the fixed price for every treatment it undertakes. If the treatment costs more – and around half of England’s hospitals are expected to fall into this high-cost category – the hospital will have to find ways of bringing those costs down. It can either cut costs, or try to do more operations to generate extra money. Development of National Coding Standards within the Czech DRG System

What changes will it bring? (2) On the other hand, if it costs a hospital less than the national tariff price to perform a treatment, then it can keep the extra money, just as businesses retain their profits, to use as it sees fit. If a hospital is able to increase its volume of treatments or operations, by attracting larger numbers of patients, it can also make money. Development of National Coding Standards within the Czech DRG System

Some Concerns Concerns exist in GP surgeries and other community services that payment by results might create incentives for hospitals to treat as many patients as possible, even when it would be more appropriate for treatment to take place elsewhere. However, it may also encourage local primary care trusts to work with general practices to improve care and reduce the risk of costly hospital admissions. Development of National Coding Standards within the Czech DRG System

How fast is it being implemented? Payment by results is being rolled out relatively slowly. It will not be fully implemented until 2008/9, when the target is for 90 % of hospital care to be covered by the system. This will allow hospitals and primary care trusts (the local NHS health bodies who hold the budgets and buy services for patients) time to adjust to the new tariffs. Development of National Coding Standards within the Czech DRG System

Some Benefits If payment by results works as planned, the NHS will become more efficient and productive, undertaking more operations and treatments. Evidence from other countries with similar systems points to shorter waiting times (as in Australia) and shorter lengths of stay in hospital (as in Sweden). Development of National Coding Standards within the Czech DRG System

Some Benefits (2) Under the new system, hospitals will not get paid for unrecorded or badly recorded ('uncoded') activity. In theory, tax payers should have a much clearer idea how their money is being spent. Development of National Coding Standards within the Czech DRG System

Some Problems Payment by results rewards volume, not quality. ( Payment by Activity, according to some health economists !) Hospitals can make money if they bring costs down, or increase the amount of work they do. But cutting costs might be at the expense of better-quality equipment or staff numbers. Development of National Coding Standards within the Czech DRG System

Some Problems (2) Another is that hospitals can start to cheat on coding. For instance, the NHS tariff pays two prices for different kinds of heart attack treatment: CzK 56,800 for treatment of patients without medical complications, CzK 117,600 for those with complications. The risk is that hospitals will falsify the code (or, worse still, give unnecessary treatment) in order to make more money. Development of National Coding Standards within the Czech DRG System

What of the Future? Payment by results has the potential to become one of the current Government’s most far-reaching NHS reforms. However, it seems to have been adopted, unusually, without much public debate or indeed a great deal of questioning from the two main opposition parties in Parliament. It is too early to say what impact it is having on the NHS, but the evidence from elsewhere is mixed – there are potential benefits but the risks are considerable. It will require close scrutiny. Development of National Coding Standards within the Czech DRG System