The Payment by Results system has worked well, if not rather crudely, to incentivise increases in acute hospital activity when this was desirable to meet access targets.
The challenge now is to restrain activity and to incentivise productivity and efficiency both within and between organisations.
The Operating Framework contains a raft of incentives aimed at doing this: marginal payments for excess emergency admissions, with an SHA tax on consequent PCTs savings, best practice tariffs (probably at lower than current tariff), no payment for 'never events', increase in the value of CQUIN payments, withholding up to 10 per cent of tariff payment for poor performance, the introduction of a tariff for mental health…and more.
On the surface these changes make sense, but financial incentives alone are an unsophisticated tool to regulate a £100+ billion industry.
It is hard to predict what will happen in such a large and complex system when so many change levers are pulled simultaneously within a single year. Many of these levers are untried and untested; some may work, some may simply result in stalemate between commissioners and providers, and others may have very unintended consequences.
We may not have long to evaluate the impact, because lurking in a single short paragraph of the Operating Framework is a signal that after 2010/11 a key tenet of the current market will be abandoned – the tariff will become a maximum rather than a fixed price. Managing in a world with price competition will require the NHS to learn a whole new ball game!