A shaky edifice built on quicksand
Payment by Results is another of those ideas that is superficially attractive in theory, especially to health economists & policy makers but as I mentioned yesterday in response to Chris Ham’s comments, is executed so incompetently that it will cause immense harm.
This is more so the case when no one is sure if the hospitals are reporting from the same baseline, the methodology by which the tariffs were arrived at is opaque, there are no accurate estimates for the proportion of simple or complex cases used to derive the costs & they are at variance with most hospitals own calculations. And given that the clinical coding regime that produces the data used for these calculations is in its infancy & has been criticised from here to eternity, it appears to be all smoke & mirrors.
Of the few PbR tariffs I looked at, there was so much wide variation between trusts in different parts of the country that if paid according to them, they could not continue in business, especially when the simpler cases had been creamed off by ISTC’s, for whom the excuse is that they do not have critical care facilities that can support the more severely ill patients. But the whole edifice of IS involvement is built on the idea that simpler cases can be moved to these centres with little or no effect on the NHS. This problem is recognised internally at the DoH but there is no appetite to challenge or even to analyse or model the impact of these or any other similar policies.
….. an accounting error built into the NHS, an error which means that, despite the most drastic measures, such as ward closures, staff cuts and withdrawal of certain treatments and services, the books can never be balanced.
The introduction of the NHS tariff in 2002 - a standardised price list for operations and procedures to apply nationally - was intended to reform hospital accounting.
It was also seen as crucial to the war on waiting lists, helping to ensure better use of beds and theatre time by allowing patients to travel around the country for their operations with the procedure being paid for by their own primary care trust (PCT).
Money following the patient in this way was a fine idea in theory, but in practice the tariff has one massive flaw.
Every price for every procedure on the list is a guesstimate. No one in the whole system can say for certain that the price hospitals charge a PCT for work has any relation to the real cost of that procedure. In the majority of cases, it is simply wrong.
When the tariff was first set up, financial directors from hospitals around the country were asked to submit the price they put on a particular procedure.
The figures varied enormously, so the administrators took a mean figure and decided that was close enough.
None of the participating hospitals performed an audit to crosscheck the figures they had submitted.
No one asked the surgeons if they thought these figures were correct. Whitehall signed them off - and the price list was fixed.
Mr Steve Cannon, for example, runs a unit dealing with complicated sarcomas (bone and soft tissue cancers), and correcting complications of knee and hip surgery.
Cannon estimates that inaccurate pricing means he loses about £1,000 a case.
“We used to balance the books by performing arthroscopies [exploratory joint surgery],” he says.
“But if you remove these simple procedures, sending them to ISTCs or special NHS clinics, we can’t make any profit. The proposed tariffs for what we have to do are inadequate.
“For an operation to excise a soft tissue sarcoma, the tariff allows £1,428 per case. Add in a minimum of three days in hospital, perhaps one night in intensive care, and a top-up payment, as it is a specialist area, and the cost we can claim is £5,216 each patient.
“At present, even with all our cost-cutting measures in place, each of these cases actually costs us £8,674. We will be short by £900,000 next year on that group of patients alone.
As has been argued before, PbR should not have been brought in before the data underpinning it had been validated. The fact that Version 1 of the tariffs had to be withdrawn immediately should have warned policy-makers that Version 2 was not fit for purpose either & that any pricing mechanism would be better off awaiting a systematic analysis & rigourous approach to tariff development. Unbundled tariffs breaking down the cost of each headline item are promised in 2008 but it is anyone’s guess as to how accurate they will be, especially since there still isn’t the data to base them on & allow for local variances.
Meanwhile, in the good old US of A, even after all these years of dealing with priced healthcare, they are discovering that there is nothing rational behind it. Is this the world we want to enter?
And in the meantime, here we are still going ahead with these!
To add to these, I wonder who will be paying for them 30 years down the line.
March 12th, 2007 at 8:57 am
[...] & one that I genuinely hope comes to pass. It is indeed necessary in some cases due to the experimental nature of PbR to demonstrate just why some of the figures are wrong. In the last resort, that could lead to some [...]