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The times we are working in now need a great deal of accelerated change and there must be no negotiating that down. So my mission statement for this part of my consultancy career is to be clear that there needs to be and will be a lot of change from the work that I do with individuals and organisations and if organisations don’t want that, then it is probably best to go somewhere else.

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Developing prices for a ‘year of care’

Filed Under (Health Improvement, Health Policy, Patient Choice, Self Management) by Paul on 29-05-2012

Over the last few weeks I have been outlining the nature of the reforms that NHS commissioners will need to implement if they are to transform NHS health care. Last week I explored two different forms of contractual relationships that are being created and will be necessary if there are to be different relationships with providers.

Today I want to explore the developments in price that will be necessary if we are to construct new models of care. (Tomorrow I will look at the ‘prime provider’ model).

Real pricing for activity entered the NHS in 2002/3. It came at a time when the NHS was striving hard to bring down maximum waiting times and the Government (for which I was a special adviser to Alan Milburn) was constructing different reform levers to help speed up this process. The idea of paying hospitals for the work that they did had been a part of the NHS plan published in 2000. In 2002 we started to develop a policy of patient choice – if the patient had been waiting for an operation for more than 6 months. If a patient had to wait that long they could elect to go to a hospital that could treat them more quickly. Patients generally wanted to have their operations as soon as possible so many made that choice. Having made the move it was only fair that the hospital at which they chose to have the operation should be paid for carrying it out and the one that did not – because the waiting time was longer than 6 months – should not be paid for work they had not done.

This process of money following the patient acted as an incentive for hospitals both to do more work and bring down the maximum waiting times. From that process, and the NHS plan, the pricing of activity developed. In 2004 this was added to by the policy of Foundation Trusts – who were allowed to retain positive financial balances at the end of the year.

Waiting times came down.

Now we confront a different problem – how to pay for integrated rather than episodic care. This is a very different task. Working out the price of a knee operation had seemed hard enough, but it was at least a discrete activity. The problem of pricing integrated care is much harder because each activity has been located within different parts of the NHS. Some aspects of the ‘year of care’ will need to be developed.  Non-traditional activities, such as planning exercises necessary for people with some long term conditions have not had pricing at all.

But there is a recognition from everyone in the NHS that the system now needs prices that reflect real costs that will encourage the creation of the integrated care that everyone now recognises is necessary for the 70% of NHS spend that is spent on long term conditions.

Everyone recognises too that paying for episodic care will not create an integrated pathway. Real integration is not be created by simply bringing together existing episodes of care. Pricing integrated care is not an arithmetic exercise in which one simply adds up existing care costs. To develop integrated care pricing will have to secure a pathway that provides incentives to keep as many patients out of hospital as possible. Pricing an integrated care pathway will need to construct incentives that work in a very different way from simply adding all of the existing episodes together.

So constructing these prices is not an easy matter. And over the last few years the DH has not succeeded in developing a new set of prices for integrated care.

However others have been working on it. Over the last few years very important work has been carried out in developing integrated pathways under the concept of the ‘year of care’. Whilst the main aim of this activity was not to develop pricing but to develop pathways, it represented a necessary start to the process. A look at the ‘year of care’ website will show the work that has been carried out.

However the pressure within the DH to develop a set of prices has been intense. In April there was a bit of breakthrough not just in this area of work, but in the wider method of working for the DH and the NHS.

The DH decided that rather than themselves continually failing to carry out this difficult task they would ask for a number of demonstrator sites to work out pricing. Moving at some pace they asked for locations to put themselves forward to do the hard work of costing.

The NHS recognises that this is a very, very important issue. Consequently some 90 different localities have put themselves forward to carry out what is a very, very hard task.  By the end of this month the DH hopes to have selected 6 sites to carry the work forward.

One of the most heartening things about this process is that appears that most of the NHS recognises the need for a very new approach to prices and costing and are prepared to carry out the hard work needed to calculate new prices.


One Response to “Developing prices for a ‘year of care’”

  1. Sadly, Paul, your ‘payment for wrok done’ model was flawed. The NHS hospital losing a patient to the private sector should have LOST them the charge for the operation they failed to do. This would have been a much better model than paying for the care they provide.

    The market payment system encourages demand creation (AKA advertising in many but not all cases) The motivation of the NHS should be HEALTH not TREATMENT, and paying for treatment generates all the wrong incentives. Paying nurses, doctors and surgeons to keep people healthy is far more cost effective than paying them to treat ill health.

    A business based on ill health thrives on ill health.

    The founders of the NHS, as I understand it, well understood this. By paying per capita they encouraged practitioners to keep patients fit, healthy and out of their clutches.

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