An important reform during this period was the introduction of a new system of paying providers for the care they provide.
Payment by results
An important reform
during this period was the introduction of a new system of paying providers for
the care they provide. Historically, hospitals were paid through to block
contracts, a fixed sum of money for a broadly stated service, or possibly cost
and volume contracts which attempted to specify in more detail payment that
related to levels of activity. However, in block contracts there was no
incentive for providers to increase activity, since they received no additional
funding. The NHS Plan set out the government’s intention to link the allocation
of funds to hospitals with the activity they undertake. It stated that in order
to get the best from extra resources there would be significant changes to the
way money flows around the NHS. Hospitals would be paid for the elective
activity they undertake according to a fixed tariff price (worked out as an
average price, then adjusted year on year). This was announced by the
Department of Health in 2002 as the payment by results (PbR) system. PbR was
implemented incrementally: the system began in a small way in 2003–2004, was
extended in 2004–2005, and, for the majority of trusts, included only elective
care in 2005–2006. In 2006–2007 PbR was extended to include non-elective,
accident and emergency, outpatient and emergency admissions for all acute
trusts.
The tariff price,
which of course varies between type of admission, covers all the costs of that
admission. Thus for a hip replacement, the cost of surgeon, nursing care,
physiotherapist, anaesthetics, antibiotics and prothesis is included in the
price paid. There is also a sum included for the buildings and all other direct
and indirect overheads. For each episode of care there will be a contribution
for the pharmacy team, the running of the aseptic unit and so on.
For pharmacy, there
is a particularly important aspect of PbR the tariff exclusions. Where
medicines would make a dispropotionate element of the episode of care
(admission, outpatient visit) the medicine is excluded from tariff, and the
commissioning organisation pays for the medicine separately. At the time of
writing, cancer chemotherapy, antitumour necrosis factor medicines, intravenous
immunoglobulins, along with many others, are tariff exclusions. Significant
efforts are required to ensure appropriate data are collected and recharges
made; equally PCTs are keen to scrutinise the use of these medicines to ensure
only appropriate payments are made.
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