Payment by Results for CHIM

1. Payment by Results for CHIM Dr Helen Byworth October 2008

2. Learning Outcomes • Understand the principles of PbR and its purpose • Understand the benefits of the system and what changes this means for the NHS • Understand how is links to other NHS reforms • Understand how hospital activity is measured under PbR • Understand how national tariffs are calculated and applied to patient activity • Understand the issues that have arisen and what the future holds

3. What is Payment by Results? • A transparent, rules-based system for paying NHS Trusts for the activity they undertake using a preset price • Preset price = National Tariff • Tariff x the number of patients actually seen = price paid for activity

4. Old Process • Block contracts, usually covering a whole service (e.g. Gynaecology) • One lump sum of money, regardless of numbers seen • Little understanding of content • Next year’s contract based on last year’s activity levels • + or – new developments • + inflation

5. What’s Included? • Tariff currently applies to most admitted patient care • Outpatient attendances • A&E attendances And what isn’t?… • Selected Admitted patient Care (E.g. Chemo, specialised procedures…) • Selected specialties (E.g. Mental Health, Rehab…) • Critical Care • Selected Drugs • Community Services To name a few things!

6. Measuring Activity • Inpatient activity previously measured in terms of Finished Consultant Episodes (FCEs) “The time a patient spends in the continuous care of one consultant using hospital site or care home bed(s) of one health care provider…” • Inpatients under PbR measured in Spells and Excess Bed Days “The total continuous stay of a patient using a bed on premises controlled by a health care provider during which medical care is the responsibility of one or more consultants…”

7. Spells • Patient admitted to Hospital • First FCE (FFCE) begins • Patient has subsequent FCEs • Patient Discharged • Spell finishes

8. Spell FCE 1 (FFCE) FCE 2 FCE 3 Patient Discharged Patient Admitted

9. HRGs • Inpatient FCEs classified into Healthcare Resource Groups (HRGs) • Around 550 covered by PbR in version 3.5 • Definition: “HRGs are standard groupings of clinically similar treatments, which use common levels of healthcare resource”

10. An Example H47 – Traumatic Amputation Made up of the following procedures: S18X Traumatic Amputation at neck level S780 Traumatic Amputation at hip joint S981 Traumatic Amputation of one toe and 20 more individual procedures….

11. How does it fit together? • Each FCE is coded by the hospital • Each FCE is assigned an HRG based on the procedures and diagnoses that occurred (Using ‘HRG Grouper’) • PbR exclusions removed (E.g. Rehab) • FCEs run through a ‘spell converter’ • Calculates the timing of the full spell and dominant episode HRG

12. PbR Spell Spell E28 – Cardiac Arrest D40 – COPD without complications Specialty 314 (Rehab) Dominant Episode, therefore Spell is an ‘E28’ Spell Pay only for the dominant HRG under PbR

13. Excess Bed Days • Each HRG has a trim point • Calculated based on nationally collected data on Lengths of Stay • Bed days within the PbR spell above the trim point are Excess Bed Days (EBDs)

14. Day 7 Day 0 Day 15 Day 12 Patient Admitted Patient Transferred, New FCE Patient Discharged LoS = 15 Days, 3 of which are Excess Bed Days Spell E28 – Cardiac Arrest (Trim point = 12 Days)

15. Reference Costs • Each Trust calculates a reference cost for each unit of activity, which is the cost to the Trust for providing the package of care • For example: • 2 hours in theatre • 5 days stay on a ward including • Food • Heating and lighting • Cleaning • Porters to and from theatre • Medical and Nursing staff time • These form the basis of the National Tariff

16. The National Tariff • A separate tariff applies to each HRG • One for elective spells, one for non elective spells and one for excess bed days • Daycases are charged the same as elective inpatients • Excess Bed Days cost the same for both types • See Handout 1

17. Details of the Tariff • Separate Tariff and Trim Points for Elective and Non Elective admissions • Excess Bed Days cost the same for both types • Example: G22 – Pancreas very major procedures • Elective costs £5077 (Trim point 41 days) • Non Elective costs £7082 (Trim point 69 days) • Excess Bed Days charged at £200 per day

18. A Simple Example • An Elective admission for G22 staying 45 days would cost: £4253+(£271 x 9) = £6692 Spell is 9 days over the G22 elective trim point G22 Elective Tariff G22 EBD Tariff

19. Non Elective Reductions • In contracts and activity monitoring, non elective admissions are split into Long Stay (LS) and Short Stay (SS) • SS spells have total length of stay of 0 or 1 day • Most HRGs are eligible for a reduction in cost if the stay is <2 days • Discount varies by HRG from 50% to 80% • Reduction applies only if admission is an emergency and the patient is over 16

20. Non Elective Reduction Example • An adult admission via A&E for J45 (Minor Skin Infection) would cost £ 1280 x 0.35 = £ 448 J45 Non Elective Tariff Eligible for 65% reduction < 2 days

21. Specialised Top-ups • Spells which take place within certain specialised services are eligible for additional top-ups to the tariff e.g. • Neurosciences, Children under 17, Spinal Surgery • Top-ups range from 9% to 70% • Certain HRGs are not eligible for the top-up – they are already considered specialist activity and reflected in HRG cost • Providers must be designated to receive top-ups for anything other than Children, Orthopaedic and Colorectal

22. Top-up Example • Excess Bed Days aren’t eligible for top-ups • An elective minor nose procedure (C56) performed on a child and including 2 excess bed days would cost (£680 x 1.12) + (2 x £242) = £1245.60 C56 Tariff Eligible for 12% Top-up C56 XBD Tariff

23. Group Work • A patient is admitted under G23 (Pancreatic Disorder) • Group 1 – Assume the patient is an adult admitted electively and stays 25 days • Group 2 – Assume the patient is admitted as an emergency and stays 25 days • Group 3 – Assume the patient is an adult admitted as an emergency and stays 1 day • Group 4 – Assume the patient is admitted electively for 25 days but has colorectal complications

24. Emergency Threshold • A Threshold is applied between each Provider and Commissioner for emergency non electives • Purpose is to share risk between providers and commissioners • 2008-09 Threshold set at calendar year 2007 outturn • Any activity above the threshold will be charged at half tariff • If activity levels are below the threshold, Commissioners still pay half the difference

25. And still pay 50% of this cost Pay for activity up to here at 100% tariff Pay for activity up to here at 100% tariff And this at 50% tariff 2007 Activity (£) 2008-09 Activity 2008-09 Activity • Supposed that 2007 outturn was this… …and at the end of 2008-09, outturn was higher … but if outturn was lower

26. Outpatients • Counted as attendances • Tariff at specialty level • Different tariff for first appointment and follow up appointment • Higher tariff for children • Don’t pay for DNAS • E.g. General Surgery:

27. Outpatient Procedures • New from 2006-07, coding generally not ready until 2007-08 • Separate tariff for selected procedures performed in an outpatient setting • Aims to discourage Trusts from treating as daycases and provide compensation above standard outpatient tariff • E.g. • Fine needle breast biopsies • Flexible sigmoidoscopy

28. A&E Attendances • Counted as attendances • Fall into 3 categories • Previously ‘hosted’ by local PCTs • De-hosted from 2008-09 • Patients from our area attending A&E within the SHA will be billed to us • Patients using services further afield will still be hosted by local PCTs

29. What Is Unbundling? • Currently allowed to unbundle Rehab and diagnostics • Outpatient tariffs include funding to cover diagnostic tests and inpatient tariffs include some rehab • Reimburses PCTs where they commission these services elsewhere

30. Referral not Necessary GP Independent Sector MRI GP Referred to Consultant (Outpatient Attendance) Rehab with Same Provider (e.g. Ward 20, NGH) Patient Spell on Acute Ward Rehab with Other Provider (e.g. PCT) Examples • Diagnostics • Rehab Need to unbundle the cost of this… … from this. …may include funding for bed days which actually take place here. The cost of this…

31. Contract Monitoring • Monitored via monthly Statements from Trusts • Reconciliation with PCT data • Contracts are cashed-up with providers quarterly • With PbR comes long delays, e.g. for Qtr 2 30th Sep 26th Oct 14th Dec 9th Jan Payment Made Freeze Date Qtr 2 Ends First Data Sent Qtr 3 Finishes here!

32. PbR and the Big Picture • Patient Choice • Can only work if money follows the patient • Independent Sector paid same as NHS • Practice Based Commissioning • Creates the necessary incentive to manage demand and treat patients in non-acute settings • SUS • Replaced the NWCS • Purpose is to enable consistent data between Commissioners and Trusts – HRGs will already be attached and data “spelled” • Very little confidence in the system nationally

33. Benefits to Patients • Encourage management of care in non acute settings • More preventative measures in community or GP settings • Choice of provider does not come down to financial incentives • Better quality of care, incentives to discharge promptly

34. Benefits to Commissioners • Fairness & transparency – a Trust is paid for what is actually delivered as payment is linked to activity • Know exactly what you’re getting for your money – data quality better than ever • Demand management has immediate financial benefits

35. Benefits to Providers • Improve and reward efficiency and quality • Don’t lose out if demand increases in-year, receive payment for anybody treated • Incentive to attract patients through Choice • Costs for unavoidably long stays, complications etc. are compensated

36. The Difficulties… • More financial risks to health economy • Contract monitoring uses much more resource • Difficult to reconcile data • Improvement in data quality results in loss in timeliness • Not as much local control/flexibility • Potential for gaming by both parties – performance monitoring is crucial

37. Governance • National programme of PbR audits by Audit Commission • Inpatients in second year, outpatients just going live • 2007-08 audit found 9.4% error rate in HRG coding, ranging form 0.3% to 52% • Financial error of £3.5m, but close to zero as a net error • No evidence of under/over charging or gaming • Source documentation was largest cause of errors

38. HRG4 • Over 1,200 HRGs • Much more detailed than v3.5 • Include Rehab, Critical Care, Drugs, Outpatients to name a few things • Trust’s coding needs to be changed to accommodate • Reference costs from 2006-07 data used HRG4 • Supposed to be basis for payment from April 2009, but… Number Chapter LA03B Subchapter Split

39. What’s Next? • 2009-10 road testing has not gone to plan • Tariff has been delayed (December 2008?) • All kinds of rumours – yes or no to HRG4? • Next to no guidance about implementation • Patient Transport Service (PTS) is coming out of acute tariff, another big change

40. PbR For Ambulance • North East Ambulance Service is one of the national pilot sites • Ambulance encouraged to go down local routes, no national tariff or structure planned as yet • Developing currencies that will provide incentives as well as penalties • For example, if paramedics treat on scene rather than convey to hospitals for an expensive admission, tariff reflects this • Commissioners need to ensure it delivers their expectations, e.g. Trust encouraged to improve quality and efficiency rather than ‘clocking up’ more and more activity

41. PbR For Mental Health • Local Trusts also pilots • Work commenced in 2005 to develop currencies, reports on Stage 1 published in 2006, but delays around national implementation • National PbR consultation in 2007 identified MH as a priority for PbR development • Also referred to in “High Quality Care for All” (DH June 2008) • Currencies should be available for use from 2010-11 • Further information at http://www.dh.gov.uk/en/Managingyourorganisation/Financeandplanning/NHSFinancialReforms/DH_4137762

42. Summary • Principles of PbR • Counting and measuring • National Tariffs • Fitting in the Big Picture • Benefits • Issues that have arisen • The future

43. Where to Get Help • Contact Myself Helen.Byworth@northoftyne.nhs.uk 0191 2172621 • Department of Health www.dh.gov.uk and type PBR into the search box • Includes worked examples, full technical guidance and FAQs