The payment by results (PbR) system for healthcare reimbursement is unfit for meeting the changing needs of society, according to the King’s Fund.

The think tank identified the current tariff as a barrier to the shift of healthcare from hospitals to the community.

A range of payment systems would be needed, the report argued, to encourage local innovation and to balance the priorities of quality, cost and supply.

The report explored the payment systems used in the NHS and other health economies, and examines whether PbR is able to support such long-term objectives as disease prevention and the care of long-term conditions.

Payment by results incentivises hospitals to continue treatment, thereby blocking a shift to preventative and community-based care, the report said.

It concluded that different services require different payment systems: PbR is most appropriate to elective care, but less suited to other services.

In addition, the King’s Fund said, payment systems need to be flexible to assist adaptation at a local level and trade-offs between priorities.

The NHS needs a new reimbursement framework that allows different payment systems for different types of service, the report argued.

Monitor, the foundation trust regulator, commented that it could “recognise many of the areas for improvement identified in the report” and would give it “careful consideration” when developing its pricing strategy.

Health Minister Lord Howe said: “We are working to make sure a payment system supports care being delivered closer to patients’ homes.”

He added: “We are working to expand our best practice tariff programme which supports patient-focused care, encourages innovation and makes better use of resources.”

The Department of Health (DH) has abandoned plans to use the Payment by Results tariff to stop private health providers ‘cherry-picking’ the easiest cases.

The decision breaks with a DH commitment made in November 2011 in response to the Government’s ‘listening exercise’.

However, the decision to deal with cherry-picking by “strengthening guidance” to providers has been positively greeted by the BMA and the King’s Fund.

Concern over private health companies contracted to provide NHS services selecting only the most profitable cases dates from the previous Government’s Independent Sector Treatment Programme.

It was a key concern among critics of this Government’s NHS reforms, leading NHS Deputy Chief Executive David Flory (pictured) to promise that using the tariff to discourage such behaviour would ensure “transparency and fairness.”

However, Flory recently informed NHS managers that the DH no longer planned to use tariff payments for this purpose.

“After extensive consultation and advice by the experts we believe that strengthening guidance around Payment by Results is a more effective way of preventing cherry picking,” said a DH spokesperson.

The BMA commented that using the tariff might not have solved the problem and “could have been interpreted as opening the door to price competition”. The “underlying problem” was “market reforms”, it said.

Nigel Edwards, Senior Fellow at the King’s Fund, said the tariff plan had been naive: “Pricing isn’t subtle enough to take into account all the complications of risk.” He argued that retrospective price adjustments might be more effective.

Plans to introduce a national payment by results (PbR) tariff for mental health services are facing delay due to weaknesses in the patient data.

The Government’s implementation framework for its mental health strategy says a new tariff will “connect payment to recovery and to the patient’s experience”.

But NHS data experts have said the mental health minimum dataset (MHMDS) is not reliable enough to form a basis for PbR decisions.

The proposed system would ‘cluster’ patients into 21 categories according to the type and severity of their condition. However, there is widespread concern that errors in clustering could lead to underpayment.

The MHMDS, managed by the NHS Information Centre, contains patient record data about NHS services for people with severe and lasting mental health problems in each year since 2003.

Emma Stanton, Chief Executive of Beacon Health Strategies, said one major mental health trust had shown a 40% error rate in its categorisation of inpatients.

“Real life is not connected to what the data show,” she warned. “If we have a significant number of inpatients in the wrong clusters, trusts will not be reimbursed at the correct levels.”

The planned national rollout date for the mental health tariff, 2013–14, has now been abandoned by the DH, which commented: “We are working with NHS mental health service providers to improve data quality.”

Monitor and the NHS Commissioning Board will decide when to implement a national tariff.

The Government has published an ‘implementation framework’ for its mental health strategy, involving a wide range of care services.

A ‘mental health dashboard’, allowing progress against the relevant objectives for the NHS, social care and public health to be measured, will be published in the autumn.

The framework’s core principle, and a priority for the NHS Commissioning Board, is “parity of esteem” between mental and physical healthcare.

Other priorities include giving more people access to evidence-based treatments; ensuring that patients and their families and carers are involved in service design and delivery.

The integration of mental with physical healthcare is reflected in the dual priority of improving the physical health of people with mental illness and the mental health of people with physical illness.

The framework outlines steps that commissioners and service providers, as well as business and the community, can take to improve the prevention and treatment of mental illness.

The CCG authorisation process will require applicants to prove they have the capability “to commission improved outcomes in mental health”. CCGs are urged to appoint a mental health lead at senior level, use specialist support and guidance, focus on early intervention and on recovery, and develop “innovative service models”.

Providers of mental health services should “focus on choice, recovery and personalisation”, as well as the relationship between physical and mental health.

GPs are asked to provide “appropriate early interventions”; to recognise and treat “co-morbidity of physical and mental illness”; to provide a choice of treatment for mental illness; and to develop “good practice in care planning”.

Guidelines for local authorities, health and wellbeing boards, social and public health services, Local Healthwatch and employers are included.

Support for these improvements at a national level will be provided by the NHS Commissioning Board, and by the development of a tariff for mental health services that will “connect payment to recovery and to the patient’s experience”.

The new UK life science strategy and NHS innovation review, launched by the Government this month, has been praised by the UK medical technologies sector for its promotion of innovative research and the rapid uptake of high-value technologies.

The NHS Chief Executive’s review Innovation, Health and Wealth: accelerating adoption and diffusion in the NHS outlines a number of measures the NHS will take to work in partnership with industry in order to implement effective new medical technologies throughout the NHS.

The document draws in attention, in particular, to the potential of telehealth systems to improve the management of long-term conditions, reducing hospital admissions and GP visits and so reducing the overall cost of care while improving patient outcomes, as demonstrated by the recent Whole Systems Demonstrator project.

Other areas of medical technology highlighted by the innovation document include the use of fluid monitoring in acute care and the use of assistive technologies, including wheelchairs, to improve the access of disabled people to working and other everyday environments.

Peter Ellingworth, Chief Executive of the Association of British Healthcare Industries (ABHI), the leading UK medtech trade association, said: “I welcome the Government’s focus on the life science industry. As highlighted by the Prime Minister our sector is part of ‘the virtuous circle of health, wealth and well-being’ – a real growth area for the Government as well as having the potential to make a difference to patients through the innovation we bring.

“Measures such as reform to the tariff system, enforcement of NICE guidance and the development of a procurement strategy, if done properly, could make a real difference to the medical technology sector.

“ABHI will work with the Government to make sure that the measures outlined in the Innovation Review are translated into firm actions. The measures could make a real difference to the SMEs in our sector and it is crucial that we are able to take advantage of them and continue to grow.”

Doris-Ann Williams MBE, Chief Executive of the British in Vitro Diagnostics Association (BIVDA) and a member of the Innovation Review’s External Advisory Group, commented that the Government’s announcements “represent a crucial opportunity for the life sciences sector” – and that the life science strategy and the innovation review in combination “will reinforce a genuine partnership between industry, the NHS and government.”

“To accelerate the use of innovative technologies to benefit patients and the NHS, tangible and realistic proposals were needed,” she added. “The NICE Implementation Collaborative, an innovation scorecard and a commitment to examine reimbursement mechanisms for diagnostics will all help the IVD industry to do what it needs to do to turn the vision into reality.”

Tony Davis, Chair of health technology business support organisation Medilink UK, noted that the new life science strategy “sets the stage for telehealth and telecare technologies to be made available to every person with a long-term condition or in need of care in the UK, helping them manage their health while maintaining their independence.”

“Medilink UK has been working with industry, other trade associations and the Department of Health to accelerate the roll-out of telehealth and telecare services in the NHS and social care, which will enhance the lives of three million people over the next five years,” he concluded.