Joyce Drohan, PricewaterhouseCoopers: Lessons Learned from the NHS Payment by Results Funding Model

Lessons Learned from the NHS Payment by Results (PBR) Model

Joyce Drohan Director former Senior Advisor and Policy Director (Improvement and Efficiency) for Department of Health, England

PwC

What we do in healthcare is important

Doing it well is really important

2

PricewaterhouseCoopers LLP

Content

• The challenge of transformational change in England

• Structure of the NHS and funding flows

• The challenges and issues of the current payment systems

• Elements of Effective Reimbursement

3


Content





4

PwC

£20 billion of savings by 2014….and quality up

England - Assessing the cost challenge

Quality, Innovation, Productivity & Prevention (QIPP) = a sustainable NHS

care closer to home

earlier intervention

fewer acute beds

more standardisation by reducing variation

empowered patients and reduced unit costs

Reducing Variation in quality of Care and health, and in the use of health services, with many opportunities to improve quality by raising the many to the levels of the best and to look for ways to do things better

Reducing Management Costs the Department aims to reduce management costs within primary care trusts and strategic health authorities prior to their abolition. Acute, community and mental health trusts can also redesign their back office functions to streamline, consolidate and share functions

Maximizing Productivity Such as duplication of treatment or diagnostic processes, high levels of temporary staff usage, or not achieving potential day case rates or value in how it buys things in (procurement)

Earlier Intervention the NHS is better at responding to ill health when it becomes a serious problem rather than spotting problems earlier and dealing with them before they get serious

Improving Quality can also reduce costs, for example, reducing rates of infection and self-management of non-communicable disease


Stages of Improvement and Change

Improvement with an institution

Integrated Improvement

Transformational Change

2013 Most organizations working to improve

internally

When does this happen…

what heavy lifting is needed to get there?

Qu

ali

ty I

mp

rov

es

Time


Content





8


How is the NHS run?

9

PwC

How the money flows in health

Department of Health £107bn

NHS England

£91bn

£58bn

Clinical Commissioning

Groups

Mental Health

Acute Community

Health

Specialist Commissioning

(part of NHS England)

Primary Care

£24bn

£38bn £11bn

£9bn

Monitor will influence the allocation of c.10% of

all government expenditure through its

pricing role

£9bn

£9bn

Inclusion of primary care within the remit of the

payment system is under debate

Source: Monitor, United Kingdom. 2013


Payment by Results

The Department of Health - The aim of Payment by Results (PbR) is to provide a transparent, rules-based system for paying trusts. It will reward efficiency, support patient choice and diversity and encourage activity for sustainable waiting time reductions. Payment will be linked to activity and adjusted for casemix. Importantly, this system will ensure a fair and consistent basis for hospital funding rather than being reliant principally on historic budgets and the negotiating skills of individual managers.

11

2014-2015

NHS England and Monitor have taken on responsibility for the NHS payment system from the Department of Health under rules set out in the Health and Social Care Act 2012 (the 2012 Act).

2003-2004

PwC

The Health & Social Care Act 2012 sets out a new approach for pricing and a new role for Monitor

12

Monitor will lead on:

Methodology for setting of prices

Setting prices Local modifications Rules for local price setting

NHS England will lead on:

Scope and design currencies Variation rules to National

Tariff

Close working and agreement

Joint Governance

Monitor Board

NHS England

Trade-offs are inevitable as prioritization will be where improvements can be made


PwC

The first year for which Monitor will be responsible for pricing is 2014/15

There are three current types of contract for the current payment system

Monitor’s new role on pricing covers approximately 75% (about £67bn) of

the NHS budget – or 10% of all public expenditure

PbR is the primary mechanism of reimbursement for acute care providers,

while block contracts are the primary mechanism for community services

To date this money is allocated from commissioners to providers through three primary mechanisms: • PbR reimburses providers of care by the volume and type of care (case-mix)

provided based on a schedule of prices for specific interventions (identified by Healthcare Resource Groups (HRGs))

• Local tariffs are also paid by volume, but the price is determined locally by providers and commissioners (sometimes with a guide price)

• Simple block contracts pay providers to provide a given level of capacity



Content





14


Challenges to the current PbR system

15

Efficiency

Setting Changes

Care Coordination

Episodic Care

Innovation

Bundled Payment

PbR as it stands is not well designed to

promote or support larger scale shifts in

care from hospital to other settings due

to incentives facing hospitals to

maintain income and lack of flexibility to

vary tariffs to reflect different costs of

providing care in different settings

Setting Changes

priority to the prevention of illness, the

treatment of people with long-term

conditions, and the development of

integrated care for these people requires a

radical rethink of the incentives needed.

Attention should be given to the role of

bundled payments that cover care for people

with specific long-term conditions as well as

those with co-morbidities,

Bundled payment

Incentive to focus on value, prevention and efficiency Innovation

PbR

Efficiency incentive in PbR relationship to keep costs down is

unclear. Since there is limited interest in the profit/loss on individual

services to be more efficient within the individual hospital specialties

Efficiency

it does not provide payment relating to

the costs of co-ordination itself and it

does not provide a financial framework

that supports or directly incentivizes new

ways of delivering care for people with

long-term conditions.

Care Coordination

Specific admission may form just one

part of an extended treatment cycle for

some patients. If the episode is in part

determined by the effectiveness of

services in primary and community care,

hospital treatment may not be required.

So no incentive to reduce this admission

Episodic Care

J. Appleby et. al.,2012, The King’s Fund , United Kingdom – “Payment By Results: How Can Payment Systems Deliver Better Care”


Risks to the developing system

16


Content





17

PwC

Changes to the payment system aims to achieve a number of goals….

£ Distribute funds to providers

Facilitate choice and competition between providers; and ensure expenditure is and remains sustainable

For providers: better management information systems; increase efficiency of service delivery; manage costs appropriately; allocate resources appropriately; investment; and innovation

For commissioners: improve allocation of resources between providers; and drive up the quality



Elements of an Effective Reimbursement System

19

Information

• The incentives that are created by the reimbursement system.

• This is a consequence of how information is used and how

prices are set

Compliance

• The information that is collected and used to set levels of reimbursement

Information

Incentives

Compliance Incentives

• Compliance with the reimbursement system – in

particular whether providers and commissioners operate with in the rules of the reimbursement

system

• This matters as it is the link to ensuring that the intended

incentive effects of the reimbursement system feed

through to behaviours

• .


Eight areas where we suggest that the reimbursement system could be improved

• Improving the information that is used to set reimbursement

• Ensuring the reimbursement models reflect the characteristics of the services they cover

• Adjusting for drivers of cost variation

• Encouraging quality improvements

• Improving transparency in price setting and stability of prices

• Simplifying the reimbursement system

• Working across settings of care boundaries

• Reviewing local arrangements

PwC Final Report For Monitor, United Kingdom, “Strategic Options For Costing”, 212

20

PwC

Thank You

Pricing is a new role for Monitor

A lever to promote and protect quality health care for patients

Monitor will regulate prices that cover c £65 billion of NHS services in

National Tariff Document for use by 225 CCGs and 250 providers

Enhance nature of cost and quality data

Develop and implement range of tools according to segment

Key relationship with NHS CB

3 new functions within pricing

Joyce Drohan, PricewaterhouseCoopers: Lessons Learned from the NHS Payment by Results Funding Model

Health & Medicine

health department of

nhs payment system

providers of care

quality of care

health social care act

bncommunity health

ill health

nhs budget