Published: 24/03/2005, Volume II5, No. 5947 Page 6 7

Payment by results may be three years away, but pilots will soon start - and the complexities and perverse incentives are already becoming clear. Seamus Ward reports

The Department of Health's admission in January that it was slowing down the implementation of payment by results will have been noted with interest by many in mental health.

Although the DoH insists mental health will come under the system by 2008-09, many in the sector feel payment by results is too inflexible for an area of care that can involve many different types of treatment over many years. Yet the DoH is determined to press on and has already started a number of projects that will culminate in the biggest challenge for mental health since the national service framework.

Payment by results relates activity to income by setting tariffs for groups of clinically similar treatments, known as healthcare resource groups.

The NHS Information Authority's case-mix service is developing a set of HRGs for inpatient and community-based mental health services for adults of working age and older people.

Child and adolescent, learning disabilities, substance misuse and services for patients receiving exclusively social or primary care have been excluded. The DoH hopes these services will be included at a later date.

Later this year, 19 pilot sites (including one from the private sector) will begin to use healthcare resource groups adapted from those developed in New Zealand and Australia.

DoH payment by results team economic adviser Alistair Rose acknowledges the scale of the task. 'The case-mix service's programme of work represents the best opportunity so far of developing HRGs in England that can be used to fund services, improve the allocation of resources across the system and ultimately benefit patients.' Omens from other countries are not good.

Although New Zealand and Australia developed healthcare resource groups for mental health in the 1990s, neither uses case-mix based funding in mental health. The US Medicare system (which funds care for the over-65s) introduced case-mix based funding for acute services in 1983 but has yet to implement a full-blown version of payment by results for mental health.

The Sainsbury Centre for Mental Health says much of the international uncertainty is due to the unique nature of the sector. A spokesman says: 'We have to design a system of grouping cases that takes account of the various factors that determine cost.' One way to achieve this would be to divide up the components of care and introduce a system that pays per item of service - per inpatient day or per home visit, for example. 'There is no reason why you could not see how that works and move towards a bundled system over time, ' he adds.

However, payments per inpatient day could create a perverse incentive to keep patients in hospital at a time when government policy is to treat more patients in the community.

Another problem is the poor state of information systems in mental health. Little is known about cost structures and, according to the spokesman, this could destabilise commissioners' finances if payment by results were introduced quickly.

'Data is inadequate and there is a lot of financial risk transferred to commissioners under payment by results. There has to be some concerns about commissioners as they are not particularly well developed when it comes to purchasing mental healthcare.'

Long-term conditions

Former mental health finance director and HSJ columnist Noel Plumridge says it seems unlikely that payment by results will be introduced in full in mental health by 2008. 'Much of mental healthcare is akin to long-term physical illness.

Schizophrenia and depression are essentially chronic diseases.

'Payment by results is good at promoting efficiency in hospitals for time-limited procedures: That is why its starting point has been elective surgery. You can measure the cost of a surgical procedure and the cost of a bed on a ward, measure the length of stay and then use an average or a benchmark to encourage consistency.

But how can you extend that model into something that is not time-limited, and for the most part is not hospital-based?' Mr Plumridge is unsure whether dividing up treatments would work. 'What would a healthcare resource group for depression look like?' he asks.

'The DoH approach is to unbundle the treatment and create more detailed HRGs for each part of the clinical pathway. But this has yet to be attempted, and requires better cost information than most mental health trusts currently have - not to mention a consistent national approach to recording treatment and care.' He suggests the NHS might accept that 'unbundling' will not work in the foreseeable future, and would be better off setting a budget for an illness and allowing the organisation delivering the majority of the care to manage it.

'In mental health this style of working has developed over the years, with psychiatrists and community teams skilled at building care programmes for individual patients, and at managing the 'revolving door' between inpatient beds and the community. Similar approaches, based on budget pooling, are beginning to be adopted for other long-term conditions, partly in response to payment by results' perverse incentive for hospitals to admit, ' he adds.

'Would commissioners behave differently if we had mental health HRGs that meant something?

Could they really get beyond 'we want more community and less hospital' and into the needs of individual clients? It is hard to imagine.' Stuart Bell, chief executive of South London and Maudsley trust, which took part in a study last year to assess what data is needed and what is available to develop healthcare resource groups, takes a similar approach (see box). He says the trust is not just a provider of mental health interventions but also, increasingly, a case manager of long-term conditions, subcontracting some services to the voluntary and private sectors.

Improved data collection

Mr Plumridge believes payment by results may be introduced for acute inpatient episodes, and that there could be some efficiency gains through comparing costs and lengths of stay for similar conditions. It could improve the data collection and information systems in mental health trusts.

It might also be sensible to set tariffs for tertiary mental healthcare, such as eating disorders, where treatment tends to be long and expensive.

However, if it is only introduced for acute admissions, he is concerned patients with mental illnesses may not receive the most appropriate care. 'Payment by results rewards acute episodes and, when you are paid by the episode, there is an incentive to admit patients and then discharge them quickly. There is no financial incentive to care for people outside of hospital.' Despite its reservations, SCMH supports the introduction of payment by results in mental health. 'There are some strong arguments for an activity-based payment system as opposed to block contracts which do not give the right incentives to become more efficient or increase activity. Also, it is more consistent with patient choice, ' a spokesman says.

In the meantime, the centre believes mental health trusts and their commissioners should be working hard to prepare for 2008. 'They must work out cost structures, how costs relate to different patients and their activity coding.' Mr Bell believes a payment by results system can be designed for case management in mental health by going back to the basic principles of the initiative - to establish a relationship between activity and payment, and enable comparative costing. But he says this must be aligned with service users' wishes and national policy.

'We need a regime that incentivises us to look after people as far as possible in a way that promotes their independence, keeps them well and avoids admittance to hospital. It must also enable them to make contact with other areas of social support, such as education and employment.' Mental health trusts should not make payment by results more complex than it needs to be, he adds. 'I think it can be achieved by 2008 if we look back to the policy objectives, where we want the incentives, and what information we have and are likely to get over the next three years. It will not be the final answer and I suspect it will be open to continuous reform.' But he warns: 'It is just a tool. The question we must ask is, how can we make sure it takes us in the direction outlined in the NSF?'


South London and Maudsley trust chief executive Stuart Bell (pictured) says: 'Primary care trusts give us a budget and we take on the financial risk associated with that as we take responsibility for clinical management and paying the subcontractors.

'It is a different model from most acute hospitals but not a million miles away from practice-based commissioning in primary care.' He acknowledges that some elements of mental healthcare are analogous to acute care and the acute sector payment by results system could translate directly to these. But this is a relatively small element of trusts' work.

'Something like cognitive behavioural therapy for anxiety or depression is generally a short duration treatment and is more intervention than case managementbased. So I could see some aspects of the system working well under payment by results.' Healthcare resource groups could be useful for the remaining element of mental health trusts' work: case management.

'But whether you look at HRGs as the basis for a single intervention or as a way of establishing resource use, there may be multiple interventions over time.

And there will be a need to build up a therapeutic alliance between the clinicians and the patient; over what medications they take, for example.'

Find out more

NHS Information Authority case-mix service www. nhsia. nhs. uk/casemix/pages/mentalhealth. asp

Sainsbury Centre for Mental Health report

Payment by Results: what does it mean for mental health?

www. scmh. org. uk

Key points

The DoH wants to introduce payment by results to mental healthcare by 2008-09.

The NHS Information Authority case-mix service is developing healthcare resource groups for inpatients and community care.

One way to introduce payment by results to the sector would be to pay per item of service, such as per inpatient day.