If you pay providers to do things, they will do them. For example, GP minor surgeries increased 41% after a 1990 contract change, with no reduction in hospital referrals. Payment by results also led to annual acute and elective admissions increases of 1.3-2.5%. However, things don't always work as intended. Case management programs for high-risk patients saw emergency admissions increase 16% in one study and 9% in another. It is easier to improve healthcare quality than reduce costs - only 18% of coordination intervention studies showed cost reductions. Investing in care homes resulted in a 35% reduction in hospital expenditures however, unintended consequences like supply-induced demand are possible when paying for services.

1. Supply induced demand (2)
Martin Roland
University of Cambridge

2. If you pay providers to do things, they’ll do them
GP minor surgery following the 1990 GP contract:
- increased by 41%
- no decrease in hospital referrals for minor surgery
Lowy et al BMJ 1993; 307: 413-417.

3. If you pay providers to do things, they’ll do them
Impact of payment by results
- annual increase in acute and elective admissions
of between 1.3% and 2.5%
Farrar et al. BMJ 2009; 339: b3047

4. Things don’t always work out the way you want
Change in
emergency
admissions
p value
Evercare1 +16% 0.14
Integrated care
pilots 2
+9% 0.02
Impact of intensive case management on
emergency admissions for high risk patients
1 Gravelle et al. BMJ 2007; 334: 31
2 Roland et al. Int J Integrated Care 2012; 24 July

5. It’s much easier to improve quality than to reduce cost
% of studies with
a positive
outcome for
health
% of studies with
positive outcome
for patient
experience
% of studies
which showed
reduction in cost
55% 45% 18%
Powell Davies et al Med J Aust 2008; 188 (8): S65-S68
Systematic review of interventions to improve coordination in healthcare

6. Investing £1 in care homes results in
£0.35 reduction in hospital expenditure
Forder J. Health Economics 2009; 18: 1322

7. Things to remember
• If you pay people to do things they’ll do them
• There’s always potential for unintended
consequences, including supply induced demand
• Improving care usually costs more
• The easiest way to reduce cost is to do less
• If you want to reduce cost without reducing quality,
you need to be smart

8. “To avoid
disappointment,
employ people in
pairs”