Payment by results and practice based commissioning

1. Payment by results and practice based commissioning Noel Plumridge Hammersmith 10 March 2005

2. Payment by Results consultation – autumn 2003 The strategic context is changing: 3 year PCT allocations, Foundation Trusts - need for national standards & accountability DEVOLUTION DTCs, Foundation Trusts, Franchising, Independent sector, PCTs Money flows with the patient CHOICE PLURALITY INVESTMENT Largest ever sustained increase in NHS funding - 75% held at local level Payment by Results is the essential building block for this model

3. Why Payment by Results? • Key Government policy drivers/values: - plurality of provision - equality of access - consumerism • The Department of Health requires: - operational efficiency (the price of investment) - assurance that public money has been well spent - more capacity (to meet access targets)

4. Payment by Results: The Basics • A national tariff as the basis of funding - derived from NHS reference costs - adjusted for regional cost variations • Payment for activity actually delivered - activity defined by Healthcare Resource Groups (HRGs) - activity measured in “spells” (not FCEs or OBDs) • Primary care trusts as commissioners • Service level agreements

6. Payment by Results: The Real Basics Quantity x price = income (for around 30 per cent of hospital activity in 2005-06)

7. Payment by Results – Some Big Issues • Applicability outside of acute care - chronic illness - mental health - “community” • Availability of information • Investment • Preparedness • Risk management

9. Payment by Results – Recent Developments • Trials within new foundation trusts during 2004-05 • Extending HRGs, especially into specialist care and mental health • Capping “windfall gains” – or foundation trust “freedoms”? • David Nicholson’s 2004 review • Bradford! • Removal of emergency treatment from 2005-06 tariff, except in foundation trusts

11. The Combined Impact of PbR, Patient Choice and Provider Diversity • What happened to the “gatekeeper” role? • Competition between providers • Provider marketing to GPs and patients • Increased capacity • Pressure on staffing, our main capacity constraint • Uncertainty! Multiple untested changes, implemented quickly…

12. A Return to the NHS Internal Market? What will be the combined effect of : • payment by results? • patient choice? • provider diversity? • practice-based commissioning?

13. A Broader Context? • A historical perspective - 1900-1950: infectious disease - 1950-2000: making acute hospitals more effective, then more efficient - 2000-? : managing chronic disease • Major new NHS initiatives in 2004 - “Wanless 2” and public health improvement - chronic disease management “The health care model in the developed world is not sustainable with the rising tide of chronic disease”. (Sir Liam Donaldson, May 2004)

14. Percentage of those admitted as inpatients by cumulative days spent as inpatients 1.00 5% of inpatients account for 42% of all inpatient days. 0.90 0.80 10% of inpatients account for 55% of all inpatient days. 0.70 0.60 0.50 Cumulative percentage of inpatient days 0.40 50% of inpatients account for 10% of all inpatient days. 0.30 0.20 0.10 0.00 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Percentage of inpatients Source: Analysis of British Household Panel Survey

15. Respiratory Illness: Is This the Care Pathway We Want? 9.00am. My chest feels tight today 1.30pm. Wonder if I could get in to see my GP… l 8.00pm. You’d better go down to A&E, just to be on the safe side While you’re here we’ll just do a few tests… 10.00pm. We’ll keep you in overnight, just in case

16. Competing Priorities? • Is there an inconsistency between: - Payment by Results, which rewards efficiency in acute hospitals and pays by the “spell” in hospital; and - models of chronic disease management (such as Evercare) which see hospital admission as a failure? • Have we already solved the problem that Payment by Results is meant to fix?

17. Commissioning Progress 1999-2004 • Limited progress towards NHS Plan targets • Reduction in meaningful activity data • Priority has been to balance books • PCT and trust financial deficits increasing • Increased public and political concerns about service • Practice-based commissioning reintroduced! (Tim Richardson, GP – Director, Epsom Day Surgery Ltd)

18. Why practice based commissioning? And why now? • To encourage GP involvement in service improvement and shift balance of care from secondary to primary care • Because without GPs the NHS can’t manage demand for acute care • “Because PCTs have failed” (?) (Views from IPF workshops in London and Birmingham, February-March 2005)

19. The NHS Alliance – February 2005 • Serious concerns about discharge information. • PbR allows payments to be made regardless of whether the GP has received clinical discharge information. GPs “could find they have no way of checking costs, nor of correcting any errors”. • Proposal: “without discharge information, the payment would not be approved. Then GPs who opt to manage a practice budget … would be able to check that charges for patient care are accurate”.

21. Bradford Hospitals Foundation Trust • From April to August 2004, North Bradford PCT generated 3,014 queries out of 9,178 inpatients billed by the Bradford trust. • The amount queried (£2.4 million) represented 21 per cent of the total amount billed. • Of the queries: 1,359 “appear to be administrative” 1,444 based on differences in the interpretation of in-patient admissions suggesting a potential “denial rate” of 9 per cent.

22. Bradford Hospitals Foundation Trust The financial impact of PCT challenges: • “BTH have estimated that Basic Clinical Income at risk is £5.1 million for FY 2005 … Based on the queries raised by North Bradford PCT in the YTD, one of the large PCTs, and a predicted denial rate of 9%, we believe that the actual income at risk could be £11.3 million.” • “Assuming that PCTs hold payments of disputed amounts in February and March and given a query rate of 21%, the potential lag in cash receipts could add £3.7 million to the cash requirement in the current financial year.” (Alvarez & Marsal, confidential report for Monitor, December 2004)

23. “Not that big a risk really, as long as there are reporting mechanisms and controls” “What savings?” Mismatch on timing cf LDP “Postcode lottery” Loss of focus on health inequalities GP non-engagement Lack of management capacity/information Loss of PCT staff GP disengagement from clinical networks Inefficiency: commissioning needs a critical mass Risks identified at the London and Birmingham IPF workshops Turn these on their head for an implementation checklist!

24. Some GP responses from the London and Birmingham IPF workshops • “Until you offer us budgets, how can we know whether we’re interested?” • “Who will pay for the overheads, and how much? Under fundholding we got hard cash.” • “This is about shifting the blame [for rationing] to GPs” • “I’d do it to improve the way patients are treated, but not so that I can second-guess the information people” • “Never mind clinician engagement, what about management engagement?”

25. Payment by results and practice based commissioning Noel Plumridge noelplumridge@aol.com 020-8399 6223 With acknowledgements to the Department of Health and Monitor for the use of some slides and supporting material