Some hospitals face financial upheaval under new NHS payment system

November 18, 2004

Some hospitals will face sizeable changes to their incomes under a new NHS payment system, say researchers at Dr Foster in this week's BMJ.

The "payment by results" system is essentially a way of paying health care providers a fixed price for each individual case treated. Under the new system, providers are paid for the actual activity that they undertake, instead of being commissioned through block contracts.

Previously, payments have been based on finished consultant episodes of care (the time spent under the care of one consultant), but from 2005-6, the new system across the NHS will be based on spells of care (a continuous period of time spent within one trust), which may include more than one episode.

Using hospital records, the research team compared spell based activity and episode based activity to examine the impact of using different criteria for determining numbers of heart attacks over time.

They found considerably more episodes of heart attack than there were spells. Measuring hospital activity by episode could therefore result in overestimates of up to 50% for heart attack. This carries obvious implications for estimating the incidence of disease and assessing healthcare outcomes, say the authors.

The new "payment by results" system should provide a more accurate method of calculating payments than using finished consultant episodes and will get around the problem of episode inflation, they write. However, the new system will give rise to considerable upheaval for some acute providers who risk sizeable changes to their financial incomes.

The move from episodes to spells, although potentially fairer, could exacerbate these problems, they conclude.


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