Provider Payment: highlights from the evidence

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1 Provider Payment: highlights from the evidence Anita Charlesworth Chief Economist Nuffield Trust September, October 2013

2 Provider Payment systems Activity based Not linked to activity Prospective prices Incentive to control cost Incentive to control cost determined in advanced Incentive to increase output No incentive to increase output - Efficiency - Efficiency? - Lack of budget control - Budget control - Responsive to patients - Unresponsive to patients Retrospective (prices No incentive for the hospital to No incentive for the hospital to based on cost actually control cost control cost incurred by the provider) Hospital lincentivised i to increase No incentive for the hospital to output increase output - Inefficiency - Inefficiency - Lack of budget control - Lack of budget control - Highly responsive to patients - Unresponsive to patients

3 The evolution of Payment by Results in the NHS First tariffs in HRG 15HRGs Innovation increases sharply after 2009/10 with P4P, bundling, expansion beyond acute, normative pricing and non-linear pricing CQUIN introduced 0.5%of provider income HRG4 550 elective implemented tariffs cover 2004/5 2006/7 2008/9 1400HRGs 2010/11 all acute providers No-payment for emergency readmission with 30days expansion of BPT CQUIN increased to 2.5% 2012/13 - Mandatory introduction of maternity pathway payment system - Unbundling: separate tariffs for diagnostic imaging (costs previously included in outpatient attendance tariffs) - Further expansion of BPT - Increased granularity of A&E tariff, with more separate prices -Mental health contracts within the scope of mental health currencies to be agreed based around identified mental health clusters, as a precursor to expanding PbR to mental health services 550 PBR (elective, Transition funding CQUIN increased to 2003/4 tariffs for emergency, A&E ends 1.5% of provider FTs 2005/6 & outpatient) 2007/8 PBR extended to 2009/10 income covers all acute ISTCs under NHS Best Practice 2011/12 trusts choice programme tariffs(bpt) 30% marginal tariff for emergency admissions Expansion of BPT Post discharge tariff Mental health currency Ambulance service currency Cystic fibrosis year of care? Maternity pathway shadow 2013/14

4 Hospital activity and length of stay under DRGs

5 Key Difference between case-base payment systems Number and type of patient classification system HRGs (1400) NordDRG (794) Australian DRG (665) AP-DRG (680) GDRG (1200) Pricing the case-mix adjusted activity -Raw Tariff - Weights -Scores Range of inputs and costs included Doctors fees Capital Relationship of casebased payment to budgets Budget determining Budget setting Risk sharing (budget negotiation) Range of health services covered Inpatient Outpatient A&E Mental health Adjustments factors Public vs private Provider historic costs Teaching and research Rurality and geography Outliers Innovative drugs High cost services

6 System Efficiency Factors which determine the impact on system wide efficiency: The impact on quality; The health gain from additional activity and health loss from reduced activity; Cost-shifting; Gaming; Transaction costs. No robust, systematic evidence of overall efficiency

7 Expansion of prospective payment systems beyond acute admitted patients & acute hospital outpatients USA, Australia, Netherlands & Ontario have case classification tools for rehabilitation, sub-acute & long term care, mental health USA has a PPS for home health care Countries have been cautious in using episode-based payment for many categories of sub- & non-acute care because of need for integration & risk of skimping on care for vulnerable patients Several other EU countries plan to introduce PPS for rehabilitation and mental health in future Countries have found difficulty in developing fully setting neutral payments and in bundling acute exacerbations into single payments Many countries have retained some form of per diem/week payment for patients with long term care needs

8 Australia s case-mix tools for sub-acute and non-acute care (1) AN-SNAP case mix classification tool based on impairment, function and age: palliative care, rehabilitation psychogeriatric care, and geriatric evaluation and management non-acute care (maintenance care) classifies both institutional and ambulatory care. Australian studies found assessment of functional status or QOL is best predictor of costs rather than clinical diagnosis Classification uses impairment codes, FIM score, age & phase of care for rehab; other assessment tools for palliative care, nonacute care & psychogeriatrics

9 Australia s case-mix tools for sub-acute and non-acute care (2) AN-SNAP used for activity reporting since 1999, & now also used for planning, funding allocation & benchmarking functional outcomes (+ Aust. Rehab. Outcomes Centre data) Funding model is a blended payment made up of Episode i d payment Per diem Rules l on long-stay and short-stay t outliers Uses cost-weights and base payment similar to DRG system BUT not fully setting neutral: separate ambulatory classification Shares needs assessment variables with institutional care Also includes provider type & assessment/treatment episode Community care inherently more complex & costs harder to model

10 Is case base prospective payment fit for purpose for the NHS after the Health and Social Care Act? Balance of responsibilities and expertise and alignment of incentives between commissioners and providers Budgetary control Provider Efficiency Quality Evidence Clinical engagement and support Alignment of system with other tools (guidance, regulator licensing) Measurement and data System Efficiency (right care, right time, right place)

11 Sign-up for our newsletter Follow us on Twitter: Twitter.com/NuffieldTrust Insert presenter s address here 17 October 2013

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