In 2002, the Department of Health developed a policy to fund healthcare by a national tariff applied to patient level activity. This policy, payment by results, required a new currency for the grouping of activity.

In 2002, the Department of Health developed a policy to fund healthcare by a national tariff applied to patient level activity. This policy, payment by results, required a new currency for the grouping of activity.

Its predecessor, Health Resource Group (HRG) v3.5, had been developed for a variety of purposes including benchmarking, costing and contracting but it had a number of features which made it far from ideal for patient level funding. It had wide variance of costs within each HRG; it was based on finished consultant episodes (FCEs), not spells; many areas of clinical activity were not covered and, in some areas, it no longer reflected current clinical practice.

As a result, the Information Centre was commissioned to develop HRG4 specifically for use as a currency for PbR.

Design team

To develop HRG4, the centre.put together a design team which included trust and strategic health authority.executives, clinicians and academics as well as representatives from the departments PbR policy team. I had the honour of chairing it.

The team produced a design framework that laid down an editorial style and established a common approach to the handling of age splits, complications and comorbidities and the statistical analysis of the data. We introduced the concept of 'unbundling' components of care from within a spell to encourage efficient delivery of care and to recognise that, in some cases, a component of care may not always be delivered within an HRG and that this may cause significant variation of costs.

The HRG development was done by 33 expert working groups, each representing a specialty and producing one chapter of HRGs. These groups were clinically led and had input from over 280 clinicians as well as experts from a range of disciplines such as finance, epidemiology and statistics.

The HRGs produced by this process address many of the deficiencies of v3.5. They are based on resource use and not length of stay, and on spells and not FCEs. They better reflect the variation in costs due to complications, co-morbidities and age differences. The variation in resource use within each HRG is a significant improvement over v3.5..

Identifying additional resources

These improvements begin to address the difficulty of identifying the additional resources used by the most complex cases. Complications and comorbidities and age splits will enable variations in cost due to these factors to be recognised. Adult critical care HRGs will allow reimbursement of the costs of the sickest patients but they do not include high dependency. Paediatric and neonatal critical care HRGs were not part of HRG4 and will be implemented at a later date.

HRG4 is more able to reflect the complexity of clinical cases that leads to variation in resource usage. The age and complication and co-morbidity splits, the unbundling, the critical care HRGs and the fact that they are based on resource use rather than length of stay should all enable the tariff to better reflect the cost of patient care..

The increased complexity of HRG4 will make the identification of reference costs by trusts a challenge. To achieve the benefits of PbR, trusts need to be able to compare their costs by HRG with the national tariff. If those costs are not credible and based on validated data, then clinicians and service providers will not be able to identify efficiencies or service improvements.

The challenge for the service is to develop information systems and a culture that enables the accurate identification of resource use by patient, and encourages the discussion of how to achieve an efficient and effective service so that resources are used to maximum benefit.

Dr Nicholas Griffin is a consultant paediatrician at Northampton General Hospital. He worked with the Information Centre for health and social care as a member of the steering committee that oversaw the design of HRG4.

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