NHS Pricing to be “Outcome Based”?

Law & Regulation
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NHS Pricing: A focus on outcomes or perverse incentives?

Introducing the recent Westminster Health Forum, which addressed the issue of NHS payment systems and reimbursement in healthcare, the Chairman, Rt Hon the Lord Lansley (below) declared pricing within the NHS to be “unfinished business”.

He said: “The pricing structure must be spread more widely. The NHS is efficient at creating incentives and engagement between commissioners and providers, but at the heart of the modern NHS is a focus on outcomes, which means pricing must be spread more widely to include capitation and outcomes.

He added that the system wants, and needs, value-based, fair, and objective pricing. How can that be achieved? While not specifically outlining the needs of NHS dentistry the next speaker struck a familiar chord while discussing “Developing the payment system and priorities moving forward”.

Chris Walters (top) is the Director of Pricing and Costing for NHS England and NHS Improvement. He set out to explain NHS England’s long-term plans and the work being done to transform costing.

The current planned spend for 2019/20 for the Department of Health and Social Care in England is £139.3 billion. The desire, said Chris, is to move away from UDA style activity-based payment systems by improving “up-stream prevention” and creating an “intelligent payment based on forward looking outcomes”, without losing the inherent benefits of measured activity.

He outlined the purpose of the ‘Blended’ payment system based on the type of treatment required:
• Chronic: Long-term, for example diabetes or arthritis
• Multiple: Repeated visits, including dentistry and ophthalmology
• Acute: Single emergency visit, such as an appendectomy

The mooted blended payment system comprises a fixed amount (linked to expected levels of activity) and a volume-related element that reflects actual levels of activity. The fixed payment operates at an individual clinical commissioning group (CCG)-to-provider level.

Providers and CCGs should work together to agree realistic forecast levels of activity. Agreed forecast activity should “reflect the effects of demographic pressures as well as realistic assessment of the impact of system efforts to reduce demand”. This forecast is then used to calculate an agreed value of planned activity.

Chris continued by saying that collecting patient-level costs “provides granular data” which will help formulate costs for 2021, while also recognising the need to incentivise healthy outcomes, value for money, and harmonising health activities into a coherent, blended system.

A note of caution and perverse incentives

Professor Martin Chalkley from the Centre for Economics, University of York, added a note of caution to the debate that any dentist still flying around the UDA treadmill of the current NHS contract will recognise. He warned that linking payment to activity will only incentivise activity – good or bad.

Activity-based payment added to cost saving? he asked. What does that imply for quality of service? Evidence shows that activity-based payment has the causal effect of increasing activity – but there is no evidence of any improvement to quality of care.

He concluded by saying that, in an ideal world, the National Tariff needs to transfer money from the commissioners to the providers in exchange for the delivery of healthcare while incentivising both cost-efficiency and quality of care. But, he warned, there is a tension between the goals of establishing valid incentives and paying for the services.

Nothing, he said, in the 2019/20 Tariff, would appear to address or resolve that tension.

Speakers l-r Professor Chalkley, Rebecca Clegg, Rt Hon the Lord Lansley, Tim Jaggard, and Tania Vanburen

The next speakers included Tim Jaggard, Chief Financial Officer, University College London Hospitals Foundation Trust, and Tania Vanburen, Executive Director, Professional Practice, The Royal College of Radiologists.

Jaggard reflected the opinions of the late Professor Jimmy Steele by saying that the best way to encourage the best use of resources is to encourage prevention. The NHS Tariff is set lower than the level of cost, meaning three-quarters of NHS providers are in deficit due to an unhealthy culture of growth, when it is more important to use existing resources more effectively.

He supported the concept of active collaboration between providers rather than competition for limited resources. Vanburen agreed, saying that the current payment system does not reflect the expected quality of care, and to offset it with “efficiency savings” is not practical.

She said there is a need to recognise conflicting drivers for service that create barriers to innovation, and that the NHS was not keeping pace with technology. She posited the need for a dialogue between clinical and finance experts, to reduce complexity and enhance patient outcomes.

In conclusion, Vanburen recognised the gap between qualitative and quantitative outcomes due to “short-termism and a drive to balance the books”. Under the current regime a clinician might financially lose out by trying to do the right thing – and that means there is a risk of perverse incentives being built into over-complex contracts.

I’m sure the majority of dental professionals would want to applaud these latter statements, while patiently waiting for the new NHS dental contract to step out into the limelight at last; so we can finally see what incentives will help enhance patient care in the dental surgery.