1) Payment systems alone cannot achieve all goals and a variety of payment methods are needed for different services and patient groups. 2) "Payment by Results" (PbR) has limitations in incentivizing prevention, shifting care to communities, and coordination across providers. Other countries are exploring alternatives like pay-for-performance, bundled payments, and global capitation models. 3) Successfully implementing alternatives to PbR such as bundled payments, capitation models, or pay-for-performance requires addressing challenges like standardizing metrics, integrating provider networks, and allocating financial risk.

1. Payment reforms in Europe:
Is it time to re-think “Payment by Results”?
Are other countries revisiting DRG payment?
Loraine Hawkins
Visiting Senior Fellow
The King’s Fund
Session 1A, March 7, 2013
http://www.kingsfund.org.uk/publications/payment-results-0

2. Main messages in King’s Fund Paper
1. Payment systems can’t do everything
2. One size does not fit all
 Different payment methods are needed for different services and
different patient groups
3. Payment systems need to be flexible
 Service innovation, local provider/clinician engagement & context
4. Trade-offs between objectives are inevitable
5. Data needs to be strengthened & new metrics developed
 Filling the data & metrics gap for non-acute care

3. Trade-offs in payment system design
L
Quality
Clinical engagement System
Efficiency
More complex
Budgetary
Provider
control
efficiency
Less complex
Focused objectives
Low transactions costs

4. Is PbR fit for purpose for the NHS now?
 PbR (case-based payment) is not designed to –
• shift resources to prevention or reduce demand for acute care
• shift care from hospital to community
• incentivize coordination of care across providers
• Incentivize better service delivery models for patients with LTCs
 PbR places high burden on commissioners to drive these objectives, in the
face of somewhat conflicting provider financial interests
 Windfall surpluses and deficits arising from national regulated price tariff
are less affordable than before
 Limit to ability to drive provider efficiency through tariff reductions
 Disconnect between PbR/contract administration and local clinical
commissioning – but engaging clinicians in payment fuels rising complexity

5. Innovations in HCHS payment
methods in EU, USA, Australia
 Pay-for-performance
financial accountability
Combining clinical and
 Bundled payments for pathways
 Extended episode payments
 Year-of-care payments
 Sophisticated capitation of provider
networks, with risk/gain sharing

6. Pay-for-performance for hospitals or
provider networks
 Mixed evidence - it can work for a while, if the design is right
 We don’t know if other elements of QIPs are doing the work
 Most schemes pay for “known quality processes”
 Few pay for outcomes & allow major service innovation
 Context affects impact
 Important to persist with development of P4P to accompany
bundled payments or capitation to counter incentives to skimp

7. Bundled payment: not a simple
alternative to PbR
 Only suitable for some conditions & patient groups
 Needs building-blocks of standard metrics & costing for whole pathway OR
complex procurement
 Overlaps with other payments
 Co-morbidities
 Risks of cherry-picking and under-treatment
 Governance and accountability across “virtually” integrated providers
 Dividing payment among “virtually” integrated providers
 Higher financial risk to providers
 Up-front investment in integrated patient records across settings
 “Chicken and egg” problem in driving service redesign
 Market-dominant prime contractors

8. Global capitation – with P4P and
risk sharing
 Provider network contracted to provide comprehensive care for enrolled
or assigned patients
 A target global budget is set based on risk-adjusted capitation
 Quality standards & targets are set & P4P payments are agreed
 Individual providers are paid their usual contractual payments (capitation
for GPs, case-based payments for hospitals, …) up front
 Provider contract shares the risk of the difference between the capitation
budget and activity-based-payment for actual activity
 Some schemes allow patients choice of out-of-network providers – paid
out of the global budget

9. Five proposed priorities for reform
1. Better costing, reduced cross-subsidization & stable relative values for PbR
2. Standard patient classification tools & metrics for community services
 CHS payment models already exist but need NHS research & adaptation
3. Move faster on extended pathway payments for acute plus post-acute care
for procedures with good outcome measures
4. P4P & payment innovation could be more cost-effective with a different mix
of national & local roles – common metrics, adaptive design, flexible
evaluation
5. An ambitious integrated care pilot - global capitation with risk/gain sharing –
would need “safe haven” exemptions from some law, regulation…