1. PAYMENT BY RESULTS The Effect of National Tariffs on Coronary Revascularisation Stephen Holmberg Sussex Cardiac Centre

2. PAYMENT BY RESULTS What is it? What is it? Why have it? Why have it? How does it work? How does it work? What are the problems? What are the problems? Are there solutions? Are there solutions?

3. WHAT IS PAYMENT BY RESULTS ? Specific procedures/diagnoses identified as Healthcare Resource Groups (HRGs). Specific procedures/diagnoses identified as Healthcare Resource Groups (HRGs). National tariffs determined for HRGs. National tariffs determined for HRGs. Providers reimbursed for actual work performed. Providers reimbursed for actual work performed. So what is the problem? So what is the problem?

4. …UNDER THE OLD SYSTEM (1) Most healthcare delivered as part of block contracts. Most healthcare delivered as part of block contracts. Rough agreement on costs and volumes. Rough agreement on costs and volumes. Targets relatively broad and rarely met. Targets relatively broad and rarely met. True costs poorly understood. True costs poorly understood.

5. …UNDER THE OLD SYSTEM (2) Little control for healthcare commissioners. Little control for healthcare commissioners. Agreed contracts rarely reflected activity Agreed contracts rarely reflected activity Money moved around within Trusts. Money moved around within Trusts. Savings from one area used to fund inefficiencies in another Savings from one area used to fund inefficiencies in another Funding used for different treatments other than those agreed Funding used for different treatments other than those agreed Difficult to compare costs between different providers Difficult to compare costs between different providers

6. & PAYMENT BY RESULTS? Supports patient choice and encourages hospitals to respond to patient preferences Supports patient choice and encourages hospitals to respond to patient preferences Encourages commissioners to provide effective care in the most appropriate settings Encourages commissioners to provide effective care in the most appropriate settings Rewards hospitals fairly for the work they do Rewards hospitals fairly for the work they do Increases the transparency of hospital funding Increases the transparency of hospital funding Imposes a sharper budget discipline on hospitals Imposes a sharper budget discipline on hospitals Audit Commission – “Payment by Results”

7. THE POLITICAL GAINS PbR creates a “universal currency” for procedures/conditions. PbR creates a “universal currency” for procedures/conditions. Dismantles traditional levers of power used by Hospitals and Doctors to frustrate NHS control. Dismantles traditional levers of power used by Hospitals and Doctors to frustrate NHS control. May facilitate the movement of patients to more prompt and better quality treatment. May facilitate the movement of patients to more prompt and better quality treatment. Guarantees healthcare returns for funding. Guarantees healthcare returns for funding.

8. THE ORIGINS OF PbR Diagnostic Related Groups (DRGs) were introduced in 1982/83 Diagnostic Related Groups (DRGs) were introduced in 1982/83 Purpose was to measure hospital efficiency Purpose was to measure hospital efficiency No intention to use system for finance No intention to use system for finance Structure “adapted” as basis for government reimbursement plans as Healthcare Resource Groups (HRGs) Structure “adapted” as basis for government reimbursement plans as Healthcare Resource Groups (HRGs)

9. HOW ARE THE TARIFFS SET? Trusts canvassed for prices of procedures Based on poor data Huge variation in price returns e.g. Pacemakers £58 - £30,000 !! Tariff based on 2 year retrospective returns PCI tariff subject to 20% for “medical inflation”

10. THE COST OF ELECTIVE PCI

11. WHO CHARGED WHAT? THE “HIGHROLLERS” OF PCI THE “HIGHROLLERS” OF PCI £4848RW3 £4848RW3 £4279RJ5 £4279RJ5 THE “POUNDSTRETCHERS” THE “POUNDSTRETCHERS” £167RKB £167RKB £344RH8 £344RH8 £354RHW £354RHW £374RXC £374RXC £780RTE £780RTE

12. WHO CHARGED WHAT? THE “HIGHROLLERS” OF PCI THE “HIGHROLLERS” OF PCI £4848RW3Central Manchester £4848RW3Central Manchester £4279RJ5St. Mary’s, London £4279RJ5St. Mary’s, London THE “POUNDSTRETCHERS” THE “POUNDSTRETCHERS” £167RKBCoventry £167RKBCoventry £344RH8Exeter £344RH8Exeter £354RHWReading £354RHWReading £374RXCEastbourne £374RXCEastbourne £780RTEGloucester £780RTEGloucester

13. WHAT ARE THE PROBLEMS? Is there enough money in the tariff? Is there enough money in the tariff? The system should reward best practice. The system should reward best practice. Current arrangements may not permit this. Current arrangements may not permit this. Casemix Casemix New Technologies New Technologies “Headline Charging” “Headline Charging”

14. THE TARIFFS 2003/4 PCI Elective£3326 Non-Elective£4357 Non-Elective£4357 CABG Elective£8080 Non-Elective£9863 Non-Elective£9863 2004/5 £3144 £4849 £7101 £9429

15. WHY THE CHANGES? Market Forces Factor (MFF) removed. Market Forces Factor (MFF) removed. Tariff set at lowest MFF Tariff set at lowest MFF Providers reimbursed separately for MFF Providers reimbursed separately for MFF MFF 1.0 – 1.4 MFF 1.0 – 1.4 1.0 – West Cornwall 1.0 – West Cornwall 1.4 – St. Mary’s, London 1.4 – St. Mary’s, London £21 million added for DES £21 million added for DES Assumes 50% use at +£700 Assumes 50% use at +£700

16. ISSUES OF CASEMIX Tariff is probably sufficient for “simple” PCI Tariff is probably sufficient for “simple” PCI How is “complex” PCI funded? How is “complex” PCI funded? Risks Risks Best Practice NOT followed Best Practice NOT followed “Inappropriate” procedures “Inappropriate” procedures “Cherry-picking” of cases by provider “Cherry-picking” of cases by provider Staging of procedures Staging of procedures “Unnecessary” surgery “Unnecessary” surgery

17. NEW TECHNOLOGY Tariff based on retrospective costs Tariff based on retrospective costs No opportunity to raise charges once PbR is running No opportunity to raise charges once PbR is running NHS decides how to implement funding of NICE Guidance e.g. DES NHS decides how to implement funding of NICE Guidance e.g. DES 2 year “passthrough” available but at discretion of PCTs 2 year “passthrough” available but at discretion of PCTs 2005-6 changes at least permit some flexibility 2005-6 changes at least permit some flexibility

18. HEADLINE CHARGING 68 y.o. with AMI 68 y.o. with AMI Medical Treatment, Elective Angio, Elective PCI Medical Treatment, Elective Angio, Elective PCI £3029+£809+£3326 = £7164 £3029+£809+£3326 = £7164 Medical Treatment + i.p. Angio, Elective PCI Medical Treatment + i.p. Angio, Elective PCI £3672+ £3326 = £6998 £3672+ £3326 = £6998 Medical Treatment + i.p. Angio & PCI Medical Treatment + i.p. Angio & PCI £4849 £4849 Medical Treatment + i.p. Angio & Transfer for urgent PCI Medical Treatment + i.p. Angio & Transfer for urgent PCI £3672 + £4849 = £8521 £3672 + £4849 = £8521

19. HEADLINE CHARGING (2) 72 y.o. with ACS 72 y.o. with ACS Medical Treatment, Elective Angio, Elective PCI Medical Treatment, Elective Angio, Elective PCI £1963+£809+£3326 = £6198 £1963+£809+£3326 = £6198 Medical Treatment + i.p. Angio, Elective PCI Medical Treatment + i.p. Angio, Elective PCI £3672+£3326 = £6998 £3672+£3326 = £6998 Medical Treatment + i.p. Angio & PCI Medical Treatment + i.p. Angio & PCI £4849 £4849 Medical Treatment + i.p. Angio & Transfer for urgent PCI Medical Treatment + i.p. Angio & Transfer for urgent PCI £3672+£4849 = £8521 £3672+£4849 = £8521

20. WHERE IS REIMBURSEMENT GOING? 2003-2004 Indicative tariffs introduced 2003-2004 Indicative tariffs introduced 2004-2005 Tariffs apply to certain HRGs 2004-2005 Tariffs apply to certain HRGs Including PCI (Marginal Activity) Including PCI (Marginal Activity) All activity in Foundation Trusts All activity in Foundation Trusts 2005-2006 Most HRGs covered by tariffs 2005-2006 Most HRGs covered by tariffs Now Elective Procedures only (except FTs) Now Elective Procedures only (except FTs) 2008-2009 Payment by Results will be funding basis for >90% of healthcare delivery 2008-2009 Payment by Results will be funding basis for >90% of healthcare delivery

21. LESSONS FROM OTHER COUNTRIES Is the UK simply falling in line with other health economies? Is the UK simply falling in line with other health economies? 600 HRG codes cover all activity 600 HRG codes cover all activity USA USA 400 codes cover 40% of activity 400 codes cover 40% of activity Multiple reimbursement levels per code Multiple reimbursement levels per code Truly activity based reimbursement Truly activity based reimbursement Germany Germany

22. COLD FEET? A Slope to the Level Playing Field Government acknowledges the threat of “Gaming”. Government acknowledges the threat of “Gaming”. Concern over “financial volatility” Concern over “financial volatility” PbR NOT to be extended to additional emergency care HRGs – Waiting List tariffs only PbR NOT to be extended to additional emergency care HRGs – Waiting List tariffs only “But this is not going soft on reform….we will still be implementing this new system more quickly than any other country”. (John Hutton) “But this is not going soft on reform….we will still be implementing this new system more quickly than any other country”. (John Hutton)

23. THE UK POLICY TO INTRODUCE PAYMENT BY RESULTS ACROSS VIRTUALLY ALL HEALTHCARE WITHIN 5 YEARS IS WITHOUT PRECEDENT FROM ANY OTHER HEALTHCARE ECONOMY

24. CONCLUSION (1) PbR represents both an opportunity and a risk PbR represents both an opportunity and a risk Fine detail will determine success or failure Fine detail will determine success or failure Reimbursement levels are likely to drive clinical practice Reimbursement levels are likely to drive clinical practice The introduction of PbR is so rapid that major problems are highly likely The introduction of PbR is so rapid that major problems are highly likely System may produce “Results by Payment” rather than “Payment by Results” System may produce “Results by Payment” rather than “Payment by Results”

25. CONCLUSION (2) The system can be made to work The system can be made to work Tariffs need to encourage best practice Tariffs need to encourage best practice Adequate funding Adequate funding Casemix acknowledged Casemix acknowledged New Coding Systems (NIC) New Coding Systems (NIC) Patient pathways identified Patient pathways identified Networks must share financial risk Networks must share financial risk Mechanisms must exist to fund new “approved” technology Mechanisms must exist to fund new “approved” technology