FINANCE Worries over incentives that could 'derail the entire system'

Published: 28/07/2005, Volume II5, No. 5966 Page 12

The Department of Health must design management mechanisms to moderate payment by results if its levers prove too powerful, the NHS Confederation is set to argue.

A discussion paper sent to members this week also suggests a new role of a national 'strategic market manager' holding a financial reserve and able to intervene when reconfiguration is required.

Despite the confederation's general support for PbR, the paper warns of a number of 'undesirable and unintended consequences' that could result from the policy.

These include the lack of incentives to improve quality; the system's capacity to produce wide fluctuations in income for NHS hospitals with an inflexible cost base; and the potential for unplanned increases in activity to suck money out of areas not covered by the tariff.

There have been no decisions about policing and regulation or about penalties for failure to comply with data quality standards, it says.

There are also issues around the quality of data and coding.

The paper warns against establishing a regime based on 'trying to police every single possible infraction and gaming opportunity' when in fact an assurance regime to manage commissioner-provider conflicts may be more significant.

While PbR could be allowed to run for some time to see how the policies and its acknowledged shortcomings work out the DoH needs to be ready to step in, warned confederation policy director Nigel Edwards.

'There is an argument that says go ahead with PbR, ' he said. 'But the power of the incentives is so strong that it has the danger of derailing the entire system. So there is also a strong argument that says you may want to moderate it in some way.' Any control mechanisms will need to be light enough not to stifle PbR, he added.

'The question is how do you moderate it without putting in so many caveats that it stops working.' The paper says: 'It is essential that policies, incentives and behaviours are properly aligned and that they reward rather than punish organisations for doing the right thing, clinically or in terms of population health.' Proposals from the confederation include developing a two-part tariff for specialist and emergency work, one covering the fixed costs of providing the necessary capacity and the other covering activity.

It warns it will be necessary to control the growth of non-elective activity and to reward collaboration.