Evaluating an Alternative Payment System for Health Care
By Richard Shank
The Department of Health in England first outlined plans to introduce a new system of financing hospitals called “payment by results” (PBR) in 2002. Researchers at the Universities of Aberdeen, Manchester, and Dundee have recently published a review of key outcomes associated with this new financing system. The objective of the study was to examine whether the introduction of PBR impacted key outcomes such as treatment volume, health care costs, and quality of care.
Using English hospital statistics and morbidity records from Scotland, the resources were able to analyze changes in the length of hospital stays, costs, treatment frequency, and in-hospital mortality.
PBR links the number of patients treated and the mixture of patient types to a fixed price payment system. Under this system, prices are defined in terms of spells of stay in the hospital and shaped by a number of payment incentives. A single price exists that will reimburse the hospitals for each spell of stay. Different fixed prices are set for elective and non-elective health care, reflecting the varying costs of both.
After the implementation of PBR, the researchers found a significant reduction in the length of hospital stay, and larger volumes of patients were seen during the day versus during the night, which suggests the cost of care decreased. No measurable change was found in the quality of care.
Researchers conclude that creating a fixed-cost price system in health care can help reduce treatment costs while maintaining high-quality care delivery.
Source: Farrar, S., Yi, D., Sutton, M., Chalkley, M., Sussex, J., Scott, A. 2009. Has payment by results affected the way that English hospitals provide care? British Medical Journal (Forthcoming).
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