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

Joyce Drohan
Director

former Senior Advisor and Policy Direc...
What we do in healthcare is important
Doing it well is really important

PwC

2
Content
• The challenge of transformational change in England
• Structure of the NHS and funding flows
• The challenges an...
Content
• The challenge of transformational change in England
• Structure of the NHS and funding flows
• The challenges an...
England - Assessing the cost challenge

£20 billion of savings by 2014….and quality up
PwC
Quality, Innovation, Productivity & Prevention
(QIPP) = a sustainable NHS
care closer to home
earlier intervention
fewer a...
Stages of Improvement and Change

Quality Improves

2013
Most organizations
working to improve
internally

Transformationa...
Content
• The challenge of transformational change in England
• Structure of the NHS and funding flows
• The challenges an...
How is the NHS run?

PricewaterhouseCoopers LLP

9
How the money flows in health
Department of
Health
£107bn

Monitor will influence
the allocation of c.10% of
all governmen...
Payment by Results
2003-2004
The Department of Health - The aim of Payment by Results (PbR) is to
provide a transparent, r...
The Health & Social Care Act 2012 sets out a
new approach for pricing and a new role for
Monitor
Monitor
Board

NHS Englan...
There are three current types of contract
for the current payment system
Monitor’s new role on pricing covers approximatel...
Content
• The challenge of transformational change in England
• Structure of the NHS and funding flows
• The challenges an...
Challenges to the current PbR system
Efficiency
Efficiency incentive in PbR relationship to keep costs down is
unclear. Si...
Risks to the developing system

PricewaterhouseCoopers LLP

16
Content
• The challenge of transformational change in England
• Structure of the NHS and funding flows
• The challenges an...
Changes to the payment system aims to
achieve a number of goals….
Distribute funds to providers

Facilitate choice and com...
Elements of an Effective Reimbursement System

Information
• The incentives that are created
by the reimbursement system.
...
Eight areas where we suggest that the
reimbursement system could be improved
• Improving the information that is used to s...
Thank You

Pricing is a new role for Monitor
A lever to promote and protect quality health care for patients

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

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Joyce Drohan, Director, Consulting and Deals, PricewaterhouseCoopers delivered this presentation at the 2014 Activity Based Funding conference at Toronto Convention Centre. Presentations at the event explored the risks, benefits and experiences of activity-based funding from around the world. For more information about the annual event, please visit the conference website: http://www.healthcareconferences.ca/activitybasedfunding

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

  1. 1. 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
  2. 2. What we do in healthcare is important Doing it well is really important PwC 2
  3. 3. 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 PricewaterhouseCoopers LLP 3
  4. 4. 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 PricewaterhouseCoopers LLP 4
  5. 5. England - Assessing the cost challenge £20 billion of savings by 2014….and quality up PwC
  6. 6. 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 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 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) 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
  7. 7. Stages of Improvement and Change Quality Improves 2013 Most organizations working to improve internally Transformational Change Integrated Improvement Improvement with an institution PricewaterhouseCoopers LLP When does this happen… what heavy lifting is needed to get there? Time
  8. 8. 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 PricewaterhouseCoopers LLP 8
  9. 9. How is the NHS run? PricewaterhouseCoopers LLP 9
  10. 10. How the money flows in health Department of Health £107bn Monitor will influence the allocation of c.10% of all government expenditure through its pricing role Inclusion of primary care within the remit of the payment system is under debate £91bn £9bn NHS England £24bn £58bn Specialist Commissioning (part of NHS England) £9bn Clinical Commissioning Groups £38bn Acute Source: Monitor, United Kingdom. 2013 PwC £11bn Mental Health Primary Care £9bn Community Health
  11. 11. Payment by Results 2003-2004 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. 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). PricewaterhouseCoopers LLP 11
  12. 12. The Health & Social Care Act 2012 sets out a new approach for pricing and a new role for Monitor Monitor Board NHS England Joint Governance NHS England will lead on: Monitor will lead on:   Scope and design currencies  Variation rules to National Tariff Close working and agreement    Methodology for setting of prices Setting prices Local modifications Rules for local price setting Trade-offs are inevitable as prioritization will be where improvements can be made Source: Monitor, United Kingdom. 2013 PwC 12
  13. 13. 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  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 PbR is the primary mechanism of reimbursement for acute care providers, while block contracts are the primary mechanism for community services The first year for which Monitor will be responsible for pricing is 2014/15 PwC Source: Monitor, United Kingdom. 2013
  14. 14. 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 PricewaterhouseCoopers LLP 14
  15. 15. Challenges to the current PbR system Efficiency 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 Care Coordination Setting Changes 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 Care Coordination Setting Changes 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. PbR Bundled payment 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, Innovation Episodic Care Bundled Payment Episodic Care 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 Innovation Incentive to focus on value, prevention and efficiency J. Appleby et. al.,2012, The King’s Fund , United Kingdom – “Payment By Results: How Can Payment Systems Deliver Better Care” PricewaterhouseCoopers LLP 15
  16. 16. Risks to the developing system PricewaterhouseCoopers LLP 16
  17. 17. 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 PricewaterhouseCoopers LLP 17
  18. 18. 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 PwC Source: Monitor, United Kingdom. 2013 £
  19. 19. Elements of an Effective Reimbursement System 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 Compliance Information Incentives PricewaterhouseCoopers LLP 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 19 . •
  20. 20. 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 PricewaterhouseCoopers LLP 20
  21. 21. 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 PwC

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