1. Financing of first-line care in England Matt Sutton Professor of Health Economics University of Manchester, UK matt.sutton@manchester.ac.uk VVAA Utrecht 28 March2012

2. Outline Reforms of payment systems for primary care Reforms of payment systems for secondary care Reforms of budget-holding for secondary care

3. Financing and structure of the NHS in England The National Health Service is financed from general taxation –patients incur (almost) no charges for NHS medical care Patients register with general practices, who: –are independent contractors organised in partnerships –receive weighted capitation to provide primary care ‘in-hours’ –act as ‘gatekeepers’ for hospital care Hospital Trusts are paid by activity by local health authorities for: –referrals seen and treated –patients attending Accident and Emergency Departments

4. Current financing and organisation issues General practices have little incentive to service patient demands Hospital Trusts have strong incentives to service patient demands Existing local health authorities (Primary Care Trusts) have: –no control over revenue –little control over contractual terms with providers –little control over expenditure

5. PAYMENT SYSTEMS FOR PRIMARY CARE

6. Pay-for-performance for UK primary care providers UK government decided to increase health funding substantially in 2000 New contract for primary medical care developed during a 18-month negotiation between government and union, with clinical academic experts GP vote in June 2003; 70% turnout; 79% voted in favour Major reliance on self-reporting with external audit This emphasis on clinical quality complemented a range of ongoing quality improvement initiatives Intended to link ~20% of income to performance incentives

7. New contract for primary care providers Previous GP contract developed piece-by-piece over decades –a mixture of capitation, allowances/salary, partial cost reimbursement, fee-for-service and target payments New contract since 2004 is with practices not individual GPs Payments comprise: –A Global Sum for Essential Services (weighted capitation) –Seniority Allowances (based on length of service) –Additional Services payments (opt-outs) –Enhanced Services payments (opt-ins) –Quality and Outcomes Framework (P4P)

8. QOF domains - 2011/12 Clinical domain –Process indicators for ~20 health conditions Organisational domain –Records and information –Information for patients –Education and training –Practice management –Medicines management –Quality and productivity Patient experience domain –Length of consultations Additional services domain –Cervical screening, child health, maternity, contraception

9. Hypertension indicators

10. Controlled blood pressure for hypertensive patients Points earned 4070100 57 Achievement % 60% 38 (60-40)/(70-40) x 57 = 38 Between the thresholds, revenue increases linearly with the proportion treated

11. QOF achievement in England Year2004/52005/62006/72007/82008/92009/10 Points available1,050 1,000 Average points achieved91%96% 97%95%94% Proportion of practices at maximum points 3%10%5%8%2%1% Proportion of practices achieving <90% of points --12%7%8%15%

12. GP pay levels QOF bill is £1bn per year ~ £16 per capita ~1% of NHS budget Average practice gets £130k NHS spent 9.4% more than expected in first 3 years QOF increased GP pay by 38% in 2 years

13. Source: Doran et al (BMJ, 2011)

14. Raising the thresholds for immunisation against flu The 5% increase in the upper payment threshold led to: 0.41% increase in the proportion of patients immunised 0.26% increase in the proportion of patients declared ineligible Source: Kontopantelis et al (HSR, 2011)

15. Effect on emergency hospital admissions Source: Harrison et al, in progress

16. Summary of the evidence on the QOF High expenditure commitment –In general, the targets seem to have been set at too low a level –The payments on offer appear to have been excessive Quality was already improving Impact results are sensitive to the choice of counterfactual –Performance increased most on incentivised indicators –Explicitly targeted patients also experienced positive spillovers –Mixed evidence on effects on quality for untargeted patients –Emerging evidence of impact on use of hospital care Evidence of ‘gaming’ by some practices to achieve improved scores Performance shows some sensitivity to design properties of the incentives, including payment levels and upper thresholds

17. PAYMENT SYSTEMS FOR SECONDARY CARE

18. Changes in hospital financing Activity-Based Financing Non-payment policies 2004/52010/11 Marginal emergency tariff Commissioning for Quality and Innovation Best Practice Tariffs

19. Marginal and non-payment policies 2010/11 Marginal payment (30%) for emergency admissions above level of the previous year 2011/12 Non-payment for emergency readmission (<30 days) after elective admission –With exclusion of children, cancer care, traffic accidents etc. Non-payment for emergency re-admission (<30 days) after emergency admission above a locally-agreed threshold rate 2012/13 Local reviews of emergency re-admissions – what proportion could have been avoided and by whom?

20. BUDGET-HOLDING FOR SECONDARY CARE

21. Previous experience with budget-holding by GPs Throughout the 1990s, practices could opt to become ‘Fundholders’ Fundholders held ‘soft’ budgets for prescribing and referrals, negotiated contracts with hospitals and re-invested savings Estimated to have reduced elective referrals by 4-5% Abolished in 1999 because represented a ‘two-tier’ service From 2005, local health authorities were instructed to involve practices more through Practice-Based Commissioning Progress and organisation was highly variable across the country

22. New Clinical Commissioning Groups Groups of local general practices (approx. 250 Groups) ‘Membership’ organisations Will hold ‘hard’ budgets for prescribing, community and non- specialist hospital care Covers elective and emergency hospital care Can re-invest ‘savings’ and receive a ‘Quality Premium’ bonus Budgets will be set using a weighted capitation formula Total budget of approximately £80bn

23. Current organisation Primary Care Trusts General practicesHospital Trusts Contract Referrals Payment claims Patients A&E attendances Appointments Department of Health Allocation

24. Planned re-organisation Clinical Commissioning Groups General practicesHospital Trusts Contract Referrals Payment claims Patients A&E attendances Appointments Department of Health NHS Commissioning Board Allocation

25. Types of ‘incentives’ that purchasers might face Intrinsic motivation Reputational risks, through public reporting –Career concerns –Competition for members Earned autonomy Financial incentives

26. CONCLUDING REMARKS

27. Potential uses of financial mechanisms Financial incentives could be used to –Stimulate more activity in primary care –Reduce activity in secondary care Local budget-holding may –Shift activity into the community, hopefully at same or better quality –Reduce elective care, hopefully unnecessary care –Prevent emergency care, hopefully inappropriate care

28. Some lessons from the QOF experience Involve health care professionals in the content of an incentive scheme Establish a quantitative ‘baseline’ against which impact can be measured Recognise the uncertainty over the economic aspects of incentives Avoid incentives to ‘game’, double-payments and redundant payments Leave enough time to evaluate the scheme carefully –Measured domains –Unmeasured domains –Costs and outcomes Agree with providers that any innovative funding scheme will be continuously monitored, reviewed and amended

29. Financing of first-line care in England Matt Sutton Professor of Health Economics University of Manchester, UK matt.sutton@manchester.ac.uk VVAA Utrecht 28 March2012