The Department of Health has revealed details of its plans to “quickly but carefully” introduce year-of-care tariffs in a bid to cut hospital admissions and encourage community based treatment.

The payment system is considered essential if the NHS is to meet its £20bn efficiency challenge.

The DH is seeking expressions of interest for “early implementer” sites, with a view to launching pilots next month. The scheme will enable commissioners to pay providers to care for a patient with a long-term condition for a year, rather than receive payment each time the patient is admitted to hospital.

The system aims to offer incentives to trusts to deliver the best care for patients, rather than incentivise maximum hospital activity. The pilots will be tested during 2012-13, expanded to run in shadow form nationally in 2013-14, and be fully operational by April 2014.

However, they will only cover funding for acute and community based care, and NHS-funded social care. Ambulance services, primary care and council-funded social care will remain “linked but distinct” from the pilots.

Speaking during an HSJ online seminar last week, NHS Commissioning Board improvement and transformation director Jim Easton said “most people believe [year-of-care tariffs] are the future”.

“This is not complete pie in the sky,” he said. “Let’s fight to keep the payment by results system, but let’s work really briskly to change the currencies within there… moving quickly but carefully is where we are.”

Mr Easton also suggested that year-of-care tariffs could be varied locally. “There is a really interesting question about whether there should be a single tariff for chronic disease management across the country,” he said. “There may be a strong case that Lewisham is different from Northumberland in those kind of models.”

Guidance issued by the DH in April emphasises the importance of investing in reablement services, without which it said the plans were likely to fail. The existing model is “inefficient for the hospital”, and delivers “an inadequate service for patients”, the document says.

“There is a very limited or no attempt at reablement”, it says, while transfers to social care are characterised by delays and avoidable readmissions.

Mr Easton said the commissioning board had a “couple of years” to get year-of-care tariffs operating on a national scale. This is because the next phase of the quality, innovation, productivity and prevention programme will depend on moving services from the acute sector into community and primary care. Existing payment by results tariffs would “rub up against” those plans, Mr Easton argued.

Health secretary Andrew Lansley last week encouraged clinical commissioning group leaders to adopt local payment mechanisms if it suited their aims for local services.

“As you take over responsibility for budgets you will have the power that goes with the ability to commission the services you want in the locations you want for patients,” he said.

“If the tariff serves your purposes, use it, and if it doesn’t serve your purposes, create a different community tariff, or an unbundled tariff. You should be working on the basis of what is it that will enable us to get access to the services we’re looking for, and let’s commission those services.”