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This article covers an introduction to the system of Payment by Results (PbR), and is the first of a series of two articles on the subject.

The second article in the series, to be published in the July issue of the newsletter, has more of a Geriatric Medicine focus, relating PbR to clinical practice and its potential implications for the future direction of Geriatric Medicine within the NHS.

Background to Payment by Results
Payment by Results (PbR), as a concept, was first introduced by the Department of Health in 2002, as part of wide-ranging reforms within the National Health Service (NHS)¹. It is a model of how money flows around the NHS, and sets up incentives for NHS hospitals to become more financially aware, charging commissioners (usually the local Primary Care Trust (PCT)) for treatments and services provided. The effective implementation of PbR depends on constructive relationships between all parties operating within the system.

In the United Kingdom, PbR is currently being used in England and Wales, and is based on similar models used in many countries world-wide such as Australia and Sweden¹. Most patient attendances and admissions in a secondary care setting are translated into a national tariff, which is charged to commissioners. Each tariff is determined by the Health Resource Group (HRG) that is in turn dependent on complex coding of clinical information. The HRGs are assigned using a national piece of software called the HRG Grouper. Data about an individual patient encounter, such as whether they were seen as an elective or emergency, as an in-patient or out-patient, is taken into consideration, as well as their diagnoses, investigation and procedures undertaken, and their age and background co-morbidities². The old version of HRG was 3.5 and was replaced by HRG4 in April³.

Why the need?
PbR introduces transparency in NHS financial flows as essentially the funding follows the patient. It challenges and incentivises organisations to improve efficiency and increase productivity in a very dynamic environment. Charging for each treatment provided should drive cost efficiency, incentivise new clinical activities, and make the flow of funds to and within NHS Hospital Trusts more transparent and fair⁴.

Move from HRG 3.5 to HRG4 – Concept of ‘Unbundling’
In April 2009, the previous version of HRG (v3.5) was replaced with HRG4³, which sees an increase in HRGs from over 500 to over 1400, designed to better reflect the complexities of clinical care. The concept of unbundling was to be introduced in a limited way from April 2009 and is designed to support patient choice by better aiding the process of breaking down a tariff for a patient into its constituent parts³.

As an example, the acute admission of an elderly patient because of a hip fracture secondary to a fall would be separated financially from their subsequent period of 10 days of rehabilitation prior to returning home. This gives commissioners flexibility to have different providers for discrete elements of a patient’s journey, to stimulate competition between providers; importantly though, the correct unbundled HRG will only be generated if the data is recorded appropriately and coded correctly.

Originally, there were nine areas due to be unbundled from April 2009, including rehabilitation. Other clinical services that were proposed to be unbundled within the same timescale included palliative care, chemotherapy and radiotherapy, and critical care services. Unfortunately, only one part of one of the originally proposed areas was unbundled from April 2009 – outpatient diagnostic imaging. As yet, because not even non-mandatory tariffs have been released, Trusts are unclear as to when rehabilitation will be unbundled. It may therefore be prudent for Trusts to negotiate a local tariff for their rehabilitation element of care to account for this.

The importance of clinical information and the correct coding of patient data
Accurate HRG allocation (and reimbursement) is reliant on accurate coding; however the accuracy of coding is fundamentally determined by the accuracy and timeliness of the clinical information that is documented about each patient’s investigations, diagnoses, and management. This is then coded by the hospital Clinical Coding Department and these codes produce an HRG for each patient episode.

Different tariffs are applied for investigations and procedures that the patient may have had during their in-patient episode. For example, if a patient has both a chest radiograph and an OGD (osophago-gastro-duodenoscopy), an OGD attracts a higher tariff than a chest radiograph, and thus becomes the ‘dominant investigation’. The ‘dominance’ is determined by how resource-intensive the procedure is deemed to be and there is a procedure hierarchy that demonstrates this.

Similarly with outpatient clinics, attendances at different clinics are charged at different rates, depending on the specialty assigned to that clinic. For example, a patient attendance at a geriatric-neurology clinic may attract a higher tariff than a general geriatric medicine clinic.

The HRG is generated by a complex series of steps undertaken by individual Trusts’ Coding Department. This includes generating a code for the dominant procedure carried out, using OPCS-4.4 (Office of Population for Census Survey Version 4.4). The principal diagnosis reached during an in-patient or outpatient episode is used to generate a separate code using ICD-10 (International Classification of Diseases Version 10). The two different codes from procedures and diagnoses are then used to generate an HRG code, which is the ‘currency’ of PbR. This process of HRG code generation is illustrated by an example below.

A term that is used within PbR is the ‘trim point’ for a particular HRG. Using the example in the box, the HRG code for thrombolysis of a TACI would assume an in-patient stay of a certain number of days – the ‘trim point’. If the patient stays in hospital for fewer days than the trim point, then the tariff is not reduced (an incentive to plan for early discharge), but if the patient’s in-patient spell exceeds the trim point, then each extra day can be charged at a pre-specific rate for that diagnosis, as set out in the HRG coding manual.

The source documentation used for coding is important and can vary from Trust to Trust - case notes, discharge summaries, operation sheets, and practice varies between Trusts as to the use of information technology to record this data. However, a common aim across Trusts must be to strive to record data used for generating income to be accurate, sufficiently detailed, and timely. The national move to the electronic record makes recording clinical information onto information systems even more important.

Conclusions
PbR has been a huge change in the way acute hospital trusts are funded. Service line management and reporting will make services and consultants accountable for the contribution they make to the Trust’s income and so clinicians need to understand how the processes that generate income work

Clinicians are not often business-minded, but may have to start to justify individual activity figures and patient data (including lengths of stay, need for rehabilitation etc.) more robustly, now that new financial importance has been placed upon these.

What is absolutely critical to PbR’s success is:

• clinical engagement to ensure that clinicians are aware and involved in the processes needed to ensure accurate reimbursement, not forgetting the impact that finance and good date quality can have on patient care.
• clinical validation to ensure that the activity data used to generate income and measure performance actually reflects the patient care.
• improved clinical information that accurately reflects patient care that is documented in real-time.

An important note to re-emphasise is that the principles of PbR lie not solely within finance but also on using it as a tool to impact on performance, service delivery and most importantly, improved patient care.

Sally Chambers
Specialist Registrar in Geriatrics and General Medicine, University Hospital of North Staffordshire, Stoke on Trent

R Kirkham
Data Quality and Clinical Coding Manager, University Hospital of North Staffordshire, Stoke on Trent

Amit Arora
Consultant Physician and Geriatrician, University Hospital of North Staffordshire, Stoke on Trent

BGS Newsletter, March 2009
Issue 21 ISSN 1748-6343 21