NOEL PLUMRIDGE on payment by results

Published: 02/09/2004, Volume II4, No. 5921 Page

For those who missed its appearance during the sultry days of late July, or perhaps chose something a little lighter for their seaside reading, the Department of Health's longawaited response to the consultation on payment by results is out.

You possibly mistook it at first glance for the 2005 edition of The Hitch-hiker's Guide to the Galaxy.

That indispensable volume, you will recall, starts with the words 'do not panic' printed in large, friendly letters.

The Department of Health, large and friendly as it is, doesn't actually use the same phrase, possibly for reasons of copyright, but That is the message that comes through plainly enough.

And although it didn't exactly knock Sven and Big Brother off the front page of the tabloids back in July, it contains some significant pointers for the future.

First, the headline. Although there is 'near-universal acceptance of the principles of payment by results, ' and the DoH is still absolutely committed to 'full' implementation of payment by results in 2008, a gentler timetable is being adopted, and less heroic savings targets are being imposed. Specifically:

only 25 per cent of hospital income will now be covered by the payment by results system in 2005/06 (the original aspiration had been 90 per cent, later trimmed to 60 per cent). The system will then be extended by further annual increments of 25 per cent until 2008.

the maximum level of savings that can reasonably be required of an above-tariff hospital during the transition period will now be 2 per cent per year (the consultation document had suggested 3 per cent). This still sounds ambitious, but may be the best deal on offer from HM Treasury for the time being.

Actually, that 'near-universal acceptance' remains wishful thinking. Some not-so-distant bits of the universe, starting with the rest of the UK, remain unconvinced. In England, NHS bodies were not asked whether they were for or against payment by results: the scope of consultation was essentially limited to technical matters. So, if the gist of many responses was: 'Sire, we admire your courageous decision to proceed along this road, and without brakes: now here are our suggestions on how to do so with slightly less risk of the wheels coming off the chariot', it would seem a little rash to interpret that as overwhelming support.

But let it pass. There is now little outright hostility, and indeed one can sense a growing keenness among acute hospital managers to return to a market system, one that this time - on the face of it - would see hospitals paid at last for their actual workload. There is also a noticeable bullishness about NHS hospitals' ability to see off commercial sector competition.

The reported crumbling of the London independent treatment centre chain in July, burnt off by lower prices at Barnet and Chase Farm Hospitals trust, and the threat of a direct challenge from the Royal Free Hampstead trust (HSJ, news, page 3, 15 July), may not have featured in the strategic DoH plan but is welcome evidence of NHS efficiency - or, at any rate, cheapness.

Independent providers are struggling to compete with the NHS on price. This keenness within the acute sector has been matched, however, by mounting alarm among PCT commissioners and finance directors expected to somehow keep the financial lid on the system. Under the choice system many are fubdubg finding themselves without the levers to do so.

The riddle at the heart of payment by results - how can one run a 'free'market within a cashlimited, tax-financed economy? - has yet to be answered.

Meanwhile, academic expertise has increasingly been describing the English implementation plan as high risk.Most hospitals are staffed largely by government employees with secure employment contracts and pension entitlements. This limits the scope for rapid change.

Consequently, most nations have introduced such funding systems cautiously, and for a limited proportion of hospital income. If the objective in England is to improve efficiency, not to prompt radical shifts in hospital configuration, why place over half of hospital income at risk from the outset? And why rush towards early implementation before the supporting systems are ready?

In short - and this is a question ministers must surely have asked - what's so important about payment by results that makes 'high risk' justifiable?

Moreover, Bob Dredge's team, leading the implementation process at DoH level, has remained small, and has not been spared from the unsettling effect of civil service staff reductions.

The rhetoric of 'this is being managed at local level' is familiar enough, but some old hands have been wondering why, if introducing tariff-based funding is apparently so important, its resourcing has been so visibly thin.

It is nearly a year since the DoH began its consultation, and a lot has happened in the interim. In the NHS sphere, arguably the biggest change has been a growing realisation that the seven-year battle on improving access to acute care has largely been won.

Not everywhere, and not in every specialty, but widely enough for acute access to be classed as a government success story.

This has not only allowed the shift of emphasis in 2004 to be on chronic disease and public health, but it has taken the urgency away from measures, including tariff funding, designed to increase acute capacity. Twelve months ago, failure to reduce waiting times looked like a potential election loser, and therefore worth a risk or two. Now, one can read into the more cautious DoH approach: do not panic.We have time to get it right.

'Several respondents asked for a less challenging process for the transition, ' says the DoH. 'We accept these comments in the belief that they give a greater certainty to the successful implementation of the policy.'

Or, payment by results is still coming, but We are reducing the potential for serious financial chaos in an election year.

This is good news. Less challenging processes are what the NHS needs more of. l Noel Plumridge is a former NHS finance director and a monthly columnist for HSJ.