The government has announced it will begin using payment by results to drive choice.

The system, which was designed to standardise the cost of medical treatment, will set the price paid to acute trusts for hospital and home births at the same level from April next year.

Home births are believed to be cheaper. The move is intended to incentivise acute trusts to offer a genuine choice to patients without worrying about the costs.

The change was contained in a letter from NHS chief executive David Nicholson to strategic health authorities outlining plans for payment by results in 2008-09. It says tariffs for home and hospital deliveries will be the same 'in order to support the provision of choice to women'.

Foundation Trust Network director Sue Slipman said tariffs looked increasingly likely to be used to support wider policy objectives.

'Payment by results can be used to good effect to encourage particular behaviours in trusts, such as increasing choice in maternity. However, it has to be remembered that unless price reflects costs it can lead to inefficiencies. Too many price signals of this kind could confuse the system and therefore have unintended consequences.'

Financial experts said using PbR to drive changes in behaviour was a sign of things to come.

York University professor of health economics Alan Maynard said: 'I think it is quite clear the Department of Health wants to use normative pricing to try and change people's behaviours.'

The payment by results tariff is based on the average cost of a procedure, known as a reference cost, but normative pricing could be based on the cost of procedures at hospitals that combine efficiency with good clinical outcomes.

Professor Maynard said: 'They might start putting financial pressure on trusts by setting a tariff at the average of the cheapest 25 per cent of hospitals. There is a clear intention to move into normative pricing.'

HSJ finance columnist Noel Plumridge said normative pricing could bring benefits.

'There's no reason why price should be the average cost. It's not necessarily the right cost, and calculating reference costs is becoming an industry in itself. Why not choose a few organisations that are performing really well and use their costs to set the price for everyone?'

Mr Plumridge said normative tariffs could be used to create incentives to treat people in the community. 'For instance, charging the same price for procedures in a polyclinic setting would give a clear incentive for their use, as commissioners would keep the savings.'

The consultation document, Options on the Future of Payment by Results, says that in 2010-11 the DoH will consider a further extension of normative pricing.