Published: 01/07/2004, Volume II3, No. 5912 Page 5

The tariffs for payment by results will be split into emergency and elective work, the government has announced in its five-year NHS improvement plan.

Previously all work had been listed under one tariff, leading to fears that emergency work, which is more expensive, would not be adequately paid for.

Other new measures introduced after a lengthy consultation on the system include an additional payment, within either tariff, to compensate trusts adequately for short-stay patients. There is also a payment to ensure that trusts with patients who stay in hospital beyond the expected length of stay are not overly penalised.

The moves are intended to ensure that it is not in a trust's financial interests to keep patients for only short stays or to discharge them before they are well enough.

But fears that payment by results will result in 'perverse incentives', whereby trusts deliberately increase elective work in order to earn more money, have not been alleviated by measures outlined in the plan.

The plan acknowledges the issues and states: 'We intend to manage these issue by reviewing utilisation rates, reducing payments for readmissions, grouping episodes, improving audit and assessing primary care trust commissioning behaviour.'

One finance insider said: 'They have recognised there is a problem, but they seem to think they can manage their way through the problem by managing PCTs.

Payment by results is not supposed to be about using managerial incentives to achieve success.'

He added that it would have to be made clear under which circumstances a trust should be paid lower rates for a patient's readmission.

And HSJ finance columnist Noel Plumridge said there was little point in introducing a retrospective system to assess inappropriate activity. 'Whatever tool is used it should be automatic, not three months after the event, ' he said.

The plan was launched last Thursday - just hours after now foundation trust chief executive Mark Britnell joined attacks on the policy for risking an increase in unnecessary secondary care admissions.

The chief executive of University Hospital Birmingham trust, which learned yesterday that it had been given the go-ahead, warned that unless the system was 'reappraised' it would lead to an increase in work being undertaken in secondary care, 'some of it appropriate, but much of it not'.

The payment by results reforms have previously been criticised by primary care managers , but this is the first time a high-profile acute trust chief executive has voiced concerns publicly.

Foundation trusts will pioneer the payment by results system a year before most of the service.

Mr Britnell told an NHS Confederation conference session last Thursday morning that payment by results should be allowed to 'let rip' on elective and diagnostic work, but that it would struggle to deal with chronic-disease management and was too 'crude and cumbersome' to deal with high-volume tertiary care.