Emergency services face sweeping payment system reform

A paper released by the two bodies this week suggests scrapping the current model, in which hospital emergency departments are paid on an activity-based ‘payment by results’ tariff while other urgent care services are on fixed ‘block’ contracts.

It says that a “fundamental change” to this model could remove barriers to the Keogh review vision of all urgent and emergency care services working together as a connected whole, with patients getting “the right advice in the right place, the first time”.

The pricing authorities plan to publish detailed examples of a new payment approach for urgent and emergency services in the next six months, and encourage commissioners to test them in practice in 2015-16.

If the test sites demonstrate positive results, the new approach could begin to be introduced nationally from 2016-17, according to the discussion paper.

“Currently, individual providers bear little or no accountability for the cost and quality performance of the [urgent and emergency care] system as a whole, and may face financial incentives in conflict with working with others to improve the system’s operational performance if this would impact their own revenue,” the discussion paper states.

• Sign up to weekkly finance updates

For example, it says that both a hospital on an activity-based contract and a community service on a block contract could be “financially disadvantaged by working together to relocate care closer to home”.

It adds that “exclusively activity-based payment for acute [emergency] services may encourage providers to deliver more activity of relatively low value to patients in acute settings at the expense of opportunities for commissioners to spend their budgets on care models that are better for patients”.

In place of the current system, it proposes a model in which all urgent and emergency care providers – from GPs, to paramedics, to specialist emergency centres – would be covered by a single payment approach.

This would involve providers receiving a “substantial proportion” of their funding as a fixed lump sum, reflecting the need for urgent and emergency services to maintain constant levels of capacity regardless of actual patient numbers.

On top of this, services would receive a proportion of funding based on patient volumes, partly to prevent providers from bearing all the financial risk of an unexpected surge in demand.

Finally, both the level of the fixed payment and the rate of the volume payment could be made dependent on the provider – and the local urgent and emergency care “system” in which it sits – meeting defined quality targets.

The paper suggests this would be a way to discourage providers that are receiving “a substantial proportion of fixed funding” from restricting access or cutting quality in order to “achieve acceptable margins”.

It adds that under this new system the controversial “marginal rate rule” - in which hospitals are paid 30 per cent of normal rates for emergency admissions above historical levels - may “not be required” in “its current form”.

The paper says it remains an “open question” which urgent and emergency care services would be covered by the new payment approach.

While it says the Keogh review vision would be best supported if it covered “as many of the services as possible”, some care, such as that offered by GPs, community pharmacies, and specialist acute services commissioned by NHS England “could come under the new payment approach later”.

Responses to the paper - titled Reimbursement of urgent and emergency care – must be submitted by 9 September.